To want to scream when people talk about inheritance tax taxing income twice?

[Runmoreorless]

You see it here and elsewhere often, people complaining that (usually) the parent has paid tax on their income why should it be taxed again when they die?

BUT the vast majority of what people leave, over the IHT threshold comes from capital gains, usually on property, which has never been taxed.

There may be other arguments against IHT but this one makes no sense.

Missingstreetlife
Chic you can be sure that it's worth more now than they paid, so that's a capital gain

Oh, so you know the personal financial details of each estate? No. Don't judge, you've no idea!

The problem with inheritance tax is that it covers both the capital gains and the income which was initially invested into the asset. So if you have pure savings or assets that you purchased recently in your estate etc then it is your income being taxed. I suppose the most logical thing to do would be to just charge CGT. But of course the rate of CGT is much lower and therefore this would be wildly unpopular (despite being much easier to administer than IHT which has an obscene amount of expection, exemptions, allowances etc) because it’s doesnt look like itsdoingenough to punish people for being wealthy. Nonetheless most income is taxed twice (once when you earn it and once when you spend it). Once you include business taxes then you income is subject to multiple taxes before you even get it. There is a good book from Wiley (can’t remember the author) called All You Need To Know About Tax (or something like that). It’s a simple yet realistic overview of how taxation works in the UK.

Ok then, you don't feel it's giving back and you assume everyone else feels like you do. Not sure what anyone can say to that, except that we don't agree. Normalise it all you want, but it's not how everyone else is.

Tax is inherently annoying, but a way of funding our society. I earn my money, I pay some tax. Then I want to by something, I pay some VAT, or maybe some stamp
Duty. Then I have to pay some council tax. Now, I want to employ somebody, like a nanny and I have to pay her out of my taxed income, and she pays tax out of my money. Then I die and the govt takes a bit more. All very annoying, but how else do we fund our civilisation?

YABU HTH

-You pay tax on earned income
-You pay tax when you use that earned & already taxed income to get groceries and clothes.

• You pay tax on fuel.

-You pay stamp duty when you buy and sell a house.

• You pay tax on savings
• You pay death taxes too....oh joy

@Userplusnumbers gifts aren’t income generally. Income taxes are charge based on a source doctrine so employment tax is charged on earnings that derive from doing a job, then you have seperate categories like sole trading etc. But gifts aren’t an income because they don’t have a source in your activities. A gift represents an individual disposing of theirassetsas they wish.

@Fleetheart people could just pay their own way with minimal duties for having a very small government and an army. (Not necessarily I am saying that’s how I do it but that’s the extreme alternative but it’s not like you can’t have a civilisation without huge rates of tax).

You should be more annoyed that the average joe pays tax while Amazon and Google pay NOTHING close to the same %

"Tax is inherently annoying, but a way of funding our society."
^^ This

I do agree that it would make far more sense for the recipient to be taxed, rather than the estate though. I'll inherit from my parents (hopefully not too soon!), I already have a good income, and it seems quite reasonable I should pay tax on anything I receive. As it stands their estate won't be large enough to attract death duties so the govt will get nothing.

Whereas someone very poor with no income might receive a share of an estate that has been taxed under death duties. It would make much more sense for them to receive the money tax free (as they wouldn't be taxed on any other money they earn).

IHT affects very few people. In the year my parents died just 4.2% of estates were liable for it. Surely £650k tax free is enough for anyone?

If someone has paid all tax due by law then they have paid all tax due! Therefore they are being taxed a second time upon death, and the complaints are valid.

I'm glad you can see that it would be fairer for each individual to be taxed on what they actually receive though.

You have to remember that money made on property isn't like cash, it's all relative. I bought my house 10 years ago, and it has increased in value. But if in five, twenty, or fifty years time it is split between my two dc, it's still only going to be worth half a house, because obviously all the other houses have increased in value too.

Looks like a lot of people want the government to have even more of our money to throw away. Green suits them.

@SarahAndQuack haven't got a clue what you're talking about

I've responded in main to the op.

Inheritance threads annoy the hell out of me on mn. The assumption that everyone will get an inheritance. The posts saying 'I got £££ but would rather have my parents'. I don't know anyone who has lost their parents and wouldn't have them back. But losing your parents and having no inheritance is never mentioned on mn. Nothing comes close to losing your parents but an inheritance will only help. And you are extremely lucky if you got one.
Sorry just really annoys me.

So the argument is that if your house has gone from £5k to £1m you should pay IHT - and on the face of it it seems a reasonable argument.
But what if you bought a house for £5k using your income you had been taxed on, you then spent money on that house and were taxed via VAT on doing it up, you then bought another house using income that you had earned and been taxed on and on your next purchase you had to pay stamp duty so you paid tax on the house. You then did that property up spending VAT on the house and purchased next house and you had to pay stamp duty and you used money that you had earned so paid tax on. And then you die in a £1m house, that you’d bought 2 years ago for £1.1m as house prices can rise or fall.

Does it now seem quite so fair that the estate is being taxed on property at £1m despite numerous times the deceased paid tax on the “cash” that purchased that house?

I would say that inheritance tax is 'unfair' as any other tax. There are many ways of ensuring that the roads are paved, we have access to healthcare and our children are educated. You can charge us at point of delivery (easier for healthcare than for pavements) or you can levy indirect taxes.

No one likes paying taxes but no one would like not having access to the things that pay for them.

There is an argument to say that taxing an asset that is bought from taxed income is not fair but though inheritance tax you largely generate revenue from the profit from this asset. Either way we need taxes to pay for the stuff we want. We're not going to get away from that any time soon.

YY, ssd.

I especially dislike the faux-confusion 'no idea what you're talking about' by people greedy for money who dislike being called on it.

Yes, you know what we're talking about.

I won’t pay any inheritance tax, because my father hasn’t made any profit from property

Seems fair.
It’s profit! If you went out and bought a car and then sold it and made 50k you would have to pay some capital gains tax on it! Because you’re making money out of it.
Earning money. And all earned money is taxable. If you don’t like that small fact about our society. Go live somewhere else!

@SarahAndQuack what a weirdo. You're reading my posts completely wrong. Are you hard of reading? Must be.

@ssd sorry it annoys you. I can see why it might.

My parents’ money and property will all be swallowed up by care home costs I’m sure of that. So I’m not worried about IHT as there will be nothing left and I am ok with that. I’m not expecting anything and nor do I want it. I’ll pay my own way thanks.

You don't pay twice.
You're dead.

You are indeed dead.

Sorry I fundamentally disagree - my parents worked all their lives, were frugal, paid off their house, never claimed a benefit in their life, gave to charity and now they should be taxed on their hard work and sensible money management - to re distribute wealth to people who did not plan aswell.

Neither of my parents were in well paid jobs but they budgeted and saved to give their grandchildren in this case a little boost in life.

Why do they have to give something back.?
Who do they owe for their hardwork?

Not the govt who made my Dad redundant by decisions they made, or the company who forced my mother out of work!

But IHT doesn’t care if you’re asset has gone up or down. CGT only acknowledges gains you even get saving if there are losses

Thanks alpaca. I think it annoys me as I'd just like to see people grateful for what they got. Saying I got a large inheritance but I'd rather have my parents just super annoys me. Saying I got a large inheritance that's made a difference to my life and I'm grateful to my parents is more honest to me. We all want our parents back, it goes without saying. But be grateful, your parents might have scrimped and saved to leave you that money. So be grateful and acknowledge it and appreciate others lose their parents and have no inheritance to help with their lives.
Just be honest.