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.

The inheritance I will have to leave comes from my late husbands life insurance and death in service. Neither were taxable. I use that money to generate an income to live on now and if don’t spend it the tax man will want his cut before my children can inherit what’s left which doesn’t sit too well for me.
I am already looking at ways to keep what I leave below the inheritance tax level and I don’t give a shiney shit if some think that is wrong. It is my money paid for by losing my husband before he even reached his retirement. He paid plenty into the system in his lifetime so why should the taxman benefit from our financial planning and his early death?

Stuffedpeppers, you can be angry all you like at the government taxing inheritance money but don't start with the crap 'to redistribute to people who did not plan as well.' My parents didn't buy a house as they couldn't afford it. They paid rent all their lives. We scrimped and did without, totally. Your parents could afford to buy a house, end of. Assuming my parents didn't plan as well as your is a load of crap. And mine didn't claim benefits either. Glad you got that bit in, aren't you.

The fastest way to defeat this tax is if Labour up it then endow it to one of the other parties. As millions flow into Tories or LibDems it'll be changed back.

As usual on MN, anyone with more money than you is "rich".

Any tax on anyone with more money than you is "fair", and let's tax the "greedy bastards". Change the threshold and start taxing or increasing the tax of the haters, and all hell breaks lose.

That's not fair EarlGrey, lots of people here, me included have said their own parents stand to pay a lot of tax on their estate but still think that's only right.

Children will effectively have an allowance of £1 m. £325k x 2 people plus house allowance of £175k x 2 people assuming that the house is left to direct descendants and your parents are still together on death.

If we are talking of £1 m plus estates then presumably the money will be invested and there will be interest payable for the care home fees. My Father is self funding in a care home. I have sold his house.

The money is invested and just about covers the care home fees. He is receiving his state pension plus his private pension. There will certainly be a fair amount left over and we are trying to make it work as hard as possible

The thing is there was never this argy bargy before the great house price inflation. Yes, some people inherited large sums, but it was only some people. Now I know a great many people who have inherited huge amounts purely through house price inflation. A friend of mine last year inherited £1.5m, simply because her parents had bought a (very modest) house in outer London years ago. So many similar tales.

Meanwhile, dh and I - nada! My parents are long dead and dh's chomped through over £500K in care home fees. Likewise if you had "hard working" parents who had a home in, say, Scunthorpe, you would not be inheriting anything like the amount of someone who had parents in Surrey.

Stuff all this "my parents worked hard, so I deserve it" loads of people do in low wage jobs. My inlaws were a school caretaker and a cleaner so despite working hard and not living extravagantly couldn't buy a house. My parents did manage to buy a house but both come from long lived families - my dad is 92 and still has older siblings alive and they have moved to a tiny house in a cheaper area so they can have a reasonably comfortable but still not extravagant old age. I doubt there will be much at all left by the time they die despite working hard all their lives. Often having a lot to leave is down to luck e.g. buying a house in the south east decades ago or inheriting money yourself. I have no problem with people being lucky but I hate people who don't recognise it as luck.

People get worked up in relation to estates which are mostly made up of a single property.
The house was bought and paid for out of already taxed income. No capital gain is due because it has not been sold. However often the house will need to be sold to pay the tax bill.
How devastating is it if you are the 23yo daughter, 18yo son and 16yo daughter left behind?

Dealing with the death of your only parent and at the same time being forced out of your home to pay a tax bill caused by your mother's early demise from cancer.

Not my story but someone I knew when I was a student.

So yes. Inheritance tax sucks for some.

In other circumstances yes I think it is right and fair to pay your dues.

The way round it would be for the person inheriting to "stand in the shoes" of the previous owner and for them to be treated as if they had purchased it originally. They would then pay all the capital gains tax.

I don't know why the government doesn't simplify IHT in this way. Unless they want to encourage some churn in the housing market......

£1.5 m AFTER IRT is paid is a huge inheritance.The house in Outer London must be massive!

Hang on a minute.

I've paid tax all my working life.

I've been very fortunate to earn a good salary the last 15 years and paid the higher rate.

Paye worker so no hidden income.

I'm not a spender.Everything I have has gone into my house, which I also paid stamp duty on. Any savings are also already taxed.

I received zero inheritance, state school educated till 16, then a series of crappy jobs until about 20 years ago.

I don't expect to live a long life so I'm unlikely to need the house to pay for a care home.

I am fucked if I'm going to allow the state to take that on my death.

And I'm a labour voter but this proposed threshold is too low.

You’ll be dead @AhNowTed, why do you care?

@AhNowTed
Well you’re just not that clever then! Proper clever rich people go and see a solicitor and work out how to not pay so much.

I came to this thread ready to agree heartily, then found OP hadn't focused on the main flaw in the argument. As another posted up-thread pointed out, there is no rule that money should get taxed once. The rule, if anything, is that it gets taxed every time it changes ownership. So it is perfectly consistent with the way the tax system generally works to tax inheritances, and logically we should (as discussed in another thread today) also tax gifts, so that people can't give money away before they die to avoid inheritance tax.

^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.^

Sorry to be picky (sticking my tax hat on) but you wouldn't be paying CGT on proft from a car as cars are deemed to be wasting chattels so exempt from CGT 🤓

I agree with IHT - DH & I did not have lots of money given to us - & yes it feels uncomfortable when you have earned money and been taxed on it - & then taxed again but I think some IHT is appropriate. Huge houses ( which mine is not ) left though the family - I think it is appropriate to apply some tax - the one I really don't like is the "mansion tax" which is ( mostly elderly) people living in a house and they have to pay yearly tax before the house is sold. Asset rich - cash poor - pay the tax when house sold.

@mindfulbear, hasn’t the main residence amendment changed this; I thought if you were living in the house the rules were different now.

Runmoreorless

it's true though. It's the same as driving, where everyone slower is a nuisance, everyone faster a lunatic.

read the Stuff all this "my parents worked hard, so I deserve it"
The point being, if my kids don't inherit, or pay so much tax it's not worth it, why should I bother saving anything for their inheritance?

I will only have assets if it benefits my kids, otherwise I am going to rental now and we splash out all we have.

@Justbreathing

Not stupid no, just happy to pay my fair share. Even happy to pay a bit more.

But this alleged 'proposal' isn't fair.

@Alsohuman

I care because without help from me, my kids will never be able to afford their own home.

Were the first generation where are kids are likely to be worse off than us.

but it isn't just on profit. If X earns money, thenpays income tax then dies - IHT is payable on what he leaves. If Y earns money and spends every penny on his kids = no tax. He does not spend on them but saves it and gives it to them after he dies - IHT is payable. (I know there are limits etc but the principle is the same)

Unless you’re planning to leave them more than half a million, you don’t really need to worry about the taxman @AhNowTed.

Originally the level of inheritance tax was set incredibly high so only the super rich would be affected. Now, due to inflation it affects most families who own properties.

Well, not really most and not equally across the country. Average house prices in some areas are far below the threshold for IT and that’s before you even consider the luck of the draw that is having to pay for residential care.

I’d be interested to see what % of estates are liable for IT as, IMO, the current threshold does appear to target only the most asset rich.

It was 4.2% of estates liable in 2015/16. Not many of us pay IHT.

It's not about 'having worked hard'. People who bought their houses in the 60s, 70s and even early 80s have seen massive inflation in house values. People didn't 'work hard all their lives' for this increase in wealth.
The reason it is taxed is because this gain is spread unfairly through the country. Maybe your parents bought a home in Surrey in 1962 for £3000 and it's now worth £3 million. Or they bought a house for £3000 in South Wales in 1962 and it's now worth £600,000. The increase in value is nothing at all to do with 'hard work'. It's entirely down to luck.
It should be taxed.