To think scrapping inheritance tax would not be popular with voters

[Lanadelday]

I'd say I can't believe the conservatives are considering it, but nothing surprises me any more that they do. But AIBU to think most people wouldn't back this anyway- I can't see it being a big vote winner and don't think they really get that voters are sick of all the inequality and so many people including kids and elderly, living in poverty, not wanting to make it worse.

@Oliotya he wasn’t a miser. He was a wonderful man from a different generation who believed in saving not spending. Yes, he took that to a more extreme levels than most but he was scarred by his poor childhood during the Second World War. How nasty are you to come on here and call someone names that you have never met.

Great policy for the Tories though.

All the parties are going to be struggling come the election. Basically they need to raise more money, but can't do it from borrowing.

By scrapping this they can do something that seems to have large negative public impact and boosts their popularity but costs relatively little. Then they can shove some extra tax on something people care about less, or cut services to make up the shortfall.

It's a classic high impact low cost policy.

Why it is high impact to the public I have no clue. Once again, the only conclusion you can come to is people are idiots, they don't understand whether or not they will have to pay the tax or they are too lazy to pay to avoid it. It's only a very small % of rich estates that need to concern themselves with it.

@EmmaGrundyForPM

I'm all for increasing IHT. Even if it was 50%, I'd still get over £100k.

But be honest. If there was something you (well your parent) could do relatively easily to avoid paying that £100k in tax, you would, wouldn't you?? Come on, be honest.

Of course, you're also looking at things wrongly. It's not "you" who pays the tax, it's the estate of the deceased, so "you" don't pay any tax at all personally. You just receive less. If your parent had made a will leaving it all to the cat's home, you'd have got nothing.

Once again, the only conclusion you can come to is people are idiots, they don't understand whether or not they will have to pay the tax or they are too lazy to pay to avoid it.

Tbf lots of people just don't want to sell their homes or pay rent to dc etc. That can get complicated. But again if you're estate is 1.3m
or whatever paying 120k in tax isn't the worst thing.

It’s a policy that appeal to a couple of primal desires in people - the desire to provide for one’s own (without anyone else taking a cut), and their aspirations to reach the point where they will be liable to pay the tax in the first place.

The UK does have one of the lowest thresholds for iht in Europe, and I think the UK actually levies the highest taxes on inheritance too, out of all developed economies. I think it’s fairly understandable that many British citizens feel aggrieved by this tbh.

Emerging economies tend not to levy it at all, or if they do it’s kept minimal, because it tends to disincentivize the creation of wealth, and doesn’t attract investment from outside sources who don’t want to find themselves being subject to pay iht. Governments have to consider whether inheritance taxes are likely to cost them more than they would gain.

As with pretty much anything concerning economics, it’s not a simple issue.

I can understand the outrage from the 5% that have to pay it.

It's the outrage from the fraction of the 95% I don't.

If you told them the Tories were going to cut taxes for the top 5% most people would (and did if I remember what happened with Truss) go nuts.

But somehow removing tax of the top 5% estates is a bad thing.

It really does make no sense. Especially since that 7 billion could simply be recovered during the lifetime of the top 5% by taxing income is seen as good whereas recovering it at the end of their life from their estate is seen as bad.

But doing something really simple, like setting up a trust or giving your children a share in the ownership of the home, can avoid that £120k having to be paid at all. A couple of thousand paid to a solicitor to save £120k sounds a really good investment to me!

Yes. Primal. = not logical.

I don't think it disincentivises the creation of wealth at all.

If the aspiration argument is correct, why don't people reject high income taxes on the rich, because surely they aspire to be earning that amount one day. But putting up income tax rates for "rich Tories" seems very popular amongst Labour circles (I guess the money to shovel towards Labours voting demographic has to come from somewhere).

People may feel aggrieved by taxes. But if they do, the bottom line is pay less, and get less services as a result.

@whumpthereitis

The UK does have one of the lowest thresholds for iht in Europe, and I think the UK actually levies the highest taxes on inheritance too, out of all developed economies. I think it’s fairly understandable that many British citizens feel aggrieved by this tbh.

Yep, that's why I've said we should have lower thresholds AND lower tax rates, so more people pay, but at lower amounts (a single rate as high as 40% is insane!), so there'd be less incentive to take steps to avoid it altogether.

It's simple taxation human behaviour. The bigger the tax, the more effort people will make to avoid it. A tax rate of 40% sounds huge so people will take steps to avoid it. If it was, say 20%, or even 10%, it doesn't sound anywhere near so bad, so people wouldn't be quite so obsessed about avoiding it. I do wish policy makers, especially re tax, would learn a bit about human behaviour!

But doing something really simple, like setting up a trust or giving your children a share in the ownership of the home, can avoid that £120k having to be paid at all.

Trust law is actually quite complicated. And again giving your dc a share of home can have other issues.

people are also using equity release to reduce iht bill & help dependents earlier on.

Economic illiteracy. The usurious interest surely costs more than the tax avoided?

@GasPanic

If the aspiration argument is correct, why don't people reject high income taxes on the rich, because surely they aspire to be earning that amount one day. But putting up income tax rates for "rich Tories" seems very popular amongst Labour circles (I guess the money to shovel towards Labours voting demographic has to come from somewhere).

Lots of people actually understand behaviour. They're not necessarily thinking of themselves. My estate will never be enough to be liable for IHT, my income isn't high enough to hit 45% (it's never even hit 40%!), but I have enough life experience to know that when a person thinks they're going to be liable for "too much" tax (in their opinion), they're going to take action to avoid it, so indirectly, detrimental to lots of lower income people because of less tax in the pot overall, so less to spend on public services etc.

I've known lots of people who've taken action to avoid high tax rates, i.e. shovelling money into pensions to avoid losing child benefit or avoid the punitive 62% tax rate on incomes over £100k, loads of people setting up trusts as part of will planning to avoid IHT, loads of part time people refusing to work extra shifts or take promotions because of the loss of benefits, back in Brown's day, huge numbers of people converting from sole trader self employment to limited companies to save tax, workers wanting to be classed as self employed instead of employed to save tax/nic., or even someone self employed buying a crew cab pick up truck instead of a car because of better tax relief - it's never ending! All because of a perception of unfairness. How about Lewis Hamiltion buying his plane via the Isle of Man to avoid paying VAT on it! How about pop stars, sports personalities, tv personalities etc living in tax havens to avoid paying UK income tax! When such people take action to reduce the tax they pay, it harms UK PLC overall!

So even "lower earning" people who aren't directly affected will be indirectly affected by less money in the pot overall.

Anyone done any serious study as to whether this will disproportionately affect women ? (What's the word when you know the answer, but pose the question to highlight no one else does ?).

And given we are in a climate catastrophe, what will any environmental impact be ?

Because this close to the apocalypse, everything a government does should be viewed against the environment. Otherwise it starts to look a little like it's all talk and no trousers, to coin a 70s phrase.

People are free to do whatever they want. But cheering a policy like this one on, whilst posting whiny "isn't climate change terrible ?" posts elsewhere doesn't really demonstrate much thought.

On the basis it might just be me the Minister for Women and Equalities is ignoring (and who'd blame them, to quote Dexys ...) , I am sure someone else here will have had a reply to the first question.

Depends on the amount borrowed against the value of the house really doesn't it? Along with the interest rate charged. You'd have to crunch the numbers to find a point where the interest charged exceeds the IHT saved. Most equity releases are pretty limited as to the percentage of the home value you can extract - it's not as if you can get out 100% of the market value! If you only take, say, 25% of the value, the interest cost could well be less than the IHT saved. The devil is in the detail. Any will/IHT/estate planner worth their salt will crunch the numbers and provide a "sweet spot" where equity release is beneficial.

A life insurance policy is also a good way to cover the IHT liability - the premium can often be less than the IHT, so a good investment, especially as the premium itself reduces the estate!

Yes, I know primal isn’t necessarily logical, but then is it always logical to expect people to support something that contradicts primal drive?

Well, ‘tax the rich’ can be very nebulous a concept, with ‘the rich’ always being those that make more than the individual that thinks they should be taxed. You see it on here: those that some consider to be ‘the rich’ oftentimes do not in fact consider themselves to be ‘the rich’.

Countries trying to attract and create wealth do tend to introduce competitive tax rates for individuals and businesses. The principle being that more people paying less tax generates more than fewer people paying higher taxes. Even if on the surface it isn’t ‘fair’, it reaps a greater reward.

I keep saying it, but it is true: capital is mobile. Right now there is a net outflow of millionaires from the UK, which means a higher burden is falling in the shoulders of those with less. The ‘off they fuck then! Good riddance!’ ideological response, that doesn’t offer anything practical, is arguably more harmful to the economic well-being of the country and its citizens than a pragmatic one would be.

It depends on the trust. Some trusts can be simple to set up and operate, but for anyone considering one the most important thing is to use the services of a solicitor who specializes in them.

Economic illiteracy. The usurious interest surely costs more than the tax avoided?

It depends on the individual circumstances & for estates around 2m it can be worth it. Plus it's often better to inherit a small amount at say 20 then a lot at 60.

Well, ‘tax the rich’ can be very nebulous a concept, with ‘the rich’ always being those that make more than the individual that thinks they should be taxed. You see it on here: those that some consider to be ‘the rich’ oftentimes do not in fact consider themselves to be ‘the rich’.

Something straight white men seem to find particularly hard to grasp.

So true.

I look at where R of Ireland is now and despair at our inability to see taxation as competitive.

We can’t get past ‘tax the rich’ even if it makes us richer to be competitive, as it has them.

I don’t know how they sold it in a GE time, but it’s worked. So depressing to watch people not consider mobility.

It depends on the trust. Some trusts can be simple to set up and operate, but for anyone considering one the most important thing is to use the services of a solicitor who specializes in them.

My direct experience is it can be complicated & trusts themselves can be subject to tax & costs For a simple bare trust you would need to live 7 yrs after you set one up.

No. It's not unfair that parents should want their children to have their belongings when they die. It IS fair that the government want to take a tax on something when the money that paid for it and the belongings themselves will already have been taxed several times along the way.

The fallacy of multiple taxation, particularly on residential property, has been debunked several times on this thread.

Well, yes, so like I said: some can be simple. I wasn’t disputing your statement that they can also be complicated. I have direct experience too 🤷🏻‍♀️

The main point I was making is that if someone is considering one, they need to consult with a solicitor who specializes in them.

No. It's not unfair that parents should want their children to have their belongings when they die. It IS fair that the government want to take a tax on something when the money that paid for it and the belongings themselves will already have been taxed several times along the way.

But they can have their belongings and up to at least £325,000 without paying any inheritance tax. Which is a decent windfall for most people surely.