Raising IHT threshold to £1,000,000 - because you're worth it...

[Figmentofmyimagination]

There are so many reasons why this change is morally repugnant, socially regressive and economically illiterate, it is hard to know where to begin with this ....

My Parents , moved from London and bought their first ever Home. Moved down coast near to Sister .

Paid just over £110,000 outright for their home in 2000 .
It is now worth half a million give or take. Told them not to leave it to us, to sell it if they wish and buy something smaller here and pehaps a holiday home abroad . They are thinking on this . Their house, their choice, their money if sold etc .. Enjoy while living , me and Sis will be alright .

YANBU. People can go on about it being human nature to want to pass wealth on as much as they like, but the bottom line is that raising the threshold supports the accumulation of unearned rather than earned wealth.

Which is weird given the 'hard work' rhetoric being spouted by The Tories and others on this thread.

Incidentally, it's also human nature to want to keep all the money one earns from working but we accept income tax because we're used to it, it happens every month, and it's not a huge chunk in one go. But the 'not fair' argument is exactly the same, only more acute. And one that no one has answered.

There's no point debating with someone who thinks untaxed inheritance isn't a driver in the property market, or someone who thinks "go and live in North Korea" is an intelligent answer to issues of social inequality. Hope they are happy in splendid isolation living under their million pound bridge.

Yes, the fact that greed and selfishness are some of the worst aspects of human nature is no reason to build society based on giving them free rein.

Why is it economically illiterate to not re-tax the same income over again?

money is double taxed all the time. you pay income tax and then VAT when you buy something. businesses pay tax and then pay employees who get taxed. Why to people only bring out this argument when it comes to inheritance tax?

I am all for lowering tax, but not to provide windfalls to a small group of people. Why not lower income tax for everyone instead? or VAT?

Ellie For the same reason the government does not tax your child's pocket money, your son when you buy him a car for his 18th birthday, or your daughter when you give her £10K towards her first home. It is earned money that has been taxed, both when it was earned, and as it accrued interest, and it is a gift from one person to another, in most cases from a parent to a child. Now, if you believe it is equitable, then surely it is equitable that all gifts from a parent to a child should be subject to taxation? Or is this a case of envy, and not one where you would be happy that the threshold should drop to a point where it encompasses you and your children?

I agree; CGT should be levied on gifts of more than £10,000, as well as IHT on anything over £20,000.

That way, people can still leave something to their children, without:

• inflating house prices
• de-motivising people who won't inherit by fueling harmful loss of social mobility (already low in the UK and likely to affect the economy badly sooner or later)
• de-motivising those who stand to inherit by encouraging them to earn their own wealth by participating in the economy as workers

As for envy, I really do not want a share of PIL's bloody supposed "fortune". I'm sick of hearing them argue about leaving money, who gets what, veiled threats of disinheritance and so on. I don't want it at all. I don't want to deal with it. I'm perfectly capable of providing for myself, and have done.

And if you've brought up your children without sufficient independence and ability to make their own way in life, you've not really done a very good job, have you?

Janethegirl: the money hasn't already been taxed. If you buy a house for £100,000 and it's worth £1m now, what taxes have you paid on that £900,000? None.

We lived in a house in west London that had previously been council owned. It was bought by the then tenants in 1990, when it was valued at 90,000. They got a 50 percent discount under Right To Buy so paid 45,000. Our neighbours bought at the same time and in the same circumstances. The houses are now worth about 800,000 pounds. Is it really fair that their children should pay not a penny on an asset that was essentially gifted to the parents by the taxpayer in the first place?

Personally I think houses should be subject to capital gains tax and that inheritances should be treated and taxed as income.

No inheritance tax at all here in Australia, no matter how large the estate. Yay!

Yes but you have spiders that crawl up your toilets and kill you.

keepitsimple - I would much rather VAT was lower, as it is a regressive tax - people on low incomes pay proportionately more of those incomes on VAT than people on higher incomes. Of course, the fucking tories know this, which is why one of the first things they did five years ago was raise it.

It is earned money that has been taxed, both when it was earned, and as it accrued interest, and it is a gift from one person to another, in most cases from a parent to a child. Now, if you believe it is equitable, then surely it is equitable that all gifts from a parent to a child should be subject to taxation? Or is this a case of envy, and not one where you would be happy that the threshold should drop to a point where it encompasses you and your children?

can you not see the difference between gifts and inheritances? They are both different in magnitude and kind, so you are making a false equivalence.

The money hasn't already been taxed. If you buy a house for £100,000 and it's worth £1m now, what taxes have you paid on that £900,000? None.
Wrong. You've lost umpteen years of compound interest on your capital, and paid umpteen years of inflation on your investment.

To take another poster's example, a house bought for £100K in 1950 may now be worth just under £1M and be exempt from inheritance tax. But, the inflation adjusted value of that £100K capital today is £994,996. Other than the utility of having had somewhere to live for the past 65 years and only having had to pay for the building's upkeep, the actual profit in a £100K to £1M home over the example given by another poster is next to nil.

Unless you invest in a property that has the capacity to outstrip inflation on a continual and sustained basis, there is no windfall for the recipient of the inheritance other than the original value that was put into the property in the first place. So yes, the money has been taxed at source, and it has then been taxes each year by the government through inflation.

If you don't know what inflation is, how it is created, or where the value goes, look it up.

Can you not see the difference between gifts and inheritances? They are both different in magnitude and kind, so you are making a false equivalence.

No they are not. They are identical actions. If Mr. Soopastar buys his son a £500K Lamborghini and Mrs. Soopagenius dies and her son inherits a £500K house, the only difference between the two is that one is dead, and the other is alive at the time the gift was given.

Are you saying that only a house should be subject to inheritance tax? Or would it be the same in your mind if Mrs. Soopagenius left her son a £500K Lamborghini also?

Or is it purely the fact that she's dead that causes the issue? If she bought him a Lamborghini it's okay as long as she's alive, blu to if she died before his birthday he should pay tax on it and Mr. Soopastar's son should not?

Just what exactly is the ethical dynamic here? I am in no way rich, so. I have no horse in this race. To put this in perspective, I doubt I will ever be able to afford to buy a home. Not even in Wales. But this all seems to be driven by greed and envy to me, and the best politics in the world is the divisive distraction politics, that appeal to the basest instincts of the electorate.

But all properties in the UK have outstripped inflation - the average house price rise from 1950 to now is over 7,000%, which is three times the rate of inflation. Anyway, your thinking is muddled from the outset with this insistence that money once taxed should never be taxed again. Every tenner you have in your purse has been part of numerous transfers of assets, ownership and wealth, all of which have been subject to tax (unless you're the Queen, or a Russian oligarch, or David Cameron's father-in-law). This is just how taxation works. And the transfer of assets through inheritance is just one example of this. It's not a special case. It's not the politics of envy. In fact, if anything, the fact that one can make a transfer of £1m without the recipient incurring any tax at all makes it a special case in the opposite direction. And it's very very easy to avoid - gifts, trusts etc. It shouldn't be, but it is. Which makes it, fundamentally, not a tax on the rich, but on the stupid.

^
Are you saying that only a house should be subject to inheritance tax? Or would it be the same in your mind if Mrs. Soopagenius left her son a £500K Lamborghini also?^

Actually, I think that gifts should be subject to tax as well. There's no difference - it's still a transfer of assets.

The true politics of envy is the insistence on sitting on an asset without paying tax just because you serendipitously happened to land on it at the right time, and worse still, trying to persuade people (and yourself!) that you worked hard for it (or otherwise acquired it through special skill etc).

It's the morality of the school yard.

Ellie a house that cost £100k in 1950 is likely to be worth a lot more than £1 million today. House price growth has seriously outstripped inflation - your example just doesn't add up.

Yup - more like £7 million. The average house price in 1950 was something like £2,000, wasn't it?

My mum's house cost £6

My mum's house cost £600 in 1959 and is now valued at £250,000.

Ellie, it hasn't taken 65 years for house prices in London to go up by a factor of 10. We bought our house 20 years ago and it is now valued at about 7 times what we paid for it. Not one penny of that capital gain has been or will be taxed while it is our principal private residence.

I don't understand your point about loss of compound interest on our capital and inflation being some form of government tax.

Most people don't have the capital sum to buy a house outright. So the idea that you either buy a house and hope it appreciates in price or put the money into some other form of investment seems unlikely to be a dilemma facing most people. Most of us have had to take out a mortgage. As I understand it, inflation is a big help here as the capital amount borrowed remains fixed over time while the house value and salaries go up (usually). So whether you repay it over the term of the mortgage or in one hit at the end, the amount you repay is a lot less proportionate to your income at the end than at the beginning, in most circumstances.

As for the point about transfer of assets, as far as the legislation is concerned it doesn't matter much what the asset transferred is. If somebody dies within 7 years of transferring an asset to another person, IHT is payable on the transfer.