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.

Would be better to scrap it and apply CGT to assets as and when they're liquidated. That way no one is forced to sell grannies beloved possessions to pay an immediate tax bill.

If grannies beloved possessions take you over that threshold that's a lot of stuff

Well, yes, so like I said: some can be simple

But a bare trust isn't simple if you did within the 7 years & that's before you start looking at potential care needs that might arise.

die

@whumpthereitis so what trust did you use out of interest?

Of course, but if you establish one early, at an age where the odds of still being alive seven years down the line are in your favour, then it can be simple.

Actually that's not a bad idea. At the moment, "gains" are ignored upon death with IHT charged instead. Perhaps we should scrap IHT and also scrap the CGT exemption on death, so that assets that have risen in value over someone's life get taxed at CGT rates, with the usual exemptions for CGT. So no CGT on the gain in someone's home, but full CGT on, say, investments such as stocks & shares or a holiday let or a BTL, etc.

I'm starting to see quite a few trusts being set up by people whilst middle aged, i.e. their 40s, so they're pretty unlikely to die (on average) in the next seven years. When I first started as an accountant 40 years ago, trusts were the preserve of "rich" people, typically people with sizeable businesses or those with country houses etc., but in the last 10 years or so, really starting to see more "normal" people setting up family trusts principally to avoid IHT due to them having multiple holiday lets or buy to lets, which usually cause a big IHT liability as when they're mortgaged, there's usually a matching life insurance policy to pay off the borrowings, and of course, just a handful of properties takes you well into IHT territory, especially where the family home has used up the IHT allowance.

lol, that's the complicated bit! Not many people would be comfortable putting main residence in their dc's name at a fairly young age or even be mortgage free then.

I'm starting to see quite a few trusts being set up by people whilst middle aged, i.e. their 40s, so they're pretty unlikely to die (on average) in the next seven years.

I'm sure it's a growing area but I wouldn't say it's particularly representative as not many people fall in that bracket let alone in their 40s

We (my husband and I, and our families) have more than one type. Non-resident.

I think part of the issue is that most wealthy people have worked hard for their money. It's the minority that prosper as trust fund babies. Even those who have been massively helped onto the ladder by parents won't be able to sustain an enviable lifestyle for too many years without bringing in the £££.

These type of people who've made sacrifices and invested lots of time, effort, and thought mostly won't be too keen on the idea of bailing out those who couldn't be arsed to put in the same effort.

Of course, plenty of people work extremely hard in low paid jobs but generally if you're able bodied there are opportunities to make at least half decent cash. Bricklayers can make £45k nowadays so you don't need to be Einstein and truckers also earn £50k+. People are quick to say they don't want to do these jobs but then why should somebody else pay for your reluctance to put yourself out and try something?

I think it was a Labour chancellor who said that inheritance tax is a voluntary levy paid by those who distrust their heirs more than they dislike the tax man.

You'd be surprised, especially with BTL/Holiday let property portfolios which are basically using the equity in one property to finance the deposit for the next, all financed by mortgages, so very heavily geared. You can build up a property portfolio of a few million pretty easily, with maybe 80-90% of the value in borrowings. If you die, life insurance pays off the borrowings, so you're estate is suddenly worth a few million! Then your executor has to sell one or two to pay the IHT! Presented like that, some kind of trust suddenly seems an exceptionally good idea!

The simplest way to avoid IHT is to get your estate under the threshold!

Very few people have the initial capital to invest in a property portfolio

If people start setting up schemes to bupas tax then tax those schemes too

You'd be surprised, especially with BTL/Holiday let property portfolios which are basically using the equity in one property to finance the deposit for the next, all financed by mortgages, so very heavily geared. You can build up a property portfolio of a few million pretty easily, with maybe 80-90% of the value in borrowings

Yes, I would be surprised if the average 40 something had a 2m plus property portfolio. And in this economic climate with the days of cheap borrowing over for some time I don't see it getting easier!

I think that's where a trust becomes very useful. The settlor can retain "control" of the assets at the same time as transferring part of them to their beneficiaries, so basically no risk as long as they don't hand over more than a controlling interest (50%). So perfectly possible to hand over 49% of your estate but retain 51% and therefore retain full control, with the added advantage of further changes if circumstances dictate.

Even a simple life interest will trust - where someone is allowed to remain in residence of, say, the family home for as long as they live, but then it goes to the ultimate beneficiary upon death - useful for second marriages etc where the deceased wants the house to go to their children ultimately, but to their current spouse/partner for as long as they live.

I think that's the point of trusts really - a sort of half way house between giving away your assets too soon (with the risks attached) or keeping them and facing IHT. Trusts allow a more controlled and phased transfer of assets from one generation to the next.

I am not sure it’s “selfish” to want to leave money to your children. I’m particularly anxious to do so for my DS, who has ASD and is likely to find it difficult to amass capital of his own. Is that selfish? It seems to me I would be a monster if I didn’t want to leave him well provided for.

Of course "the average 40 something" doesn't, but lots do! Obviously it's highly risky, but that doesn't stop people doing it.

And to be cynical, I'm not even sure it's possible to achieve a situation where everybody is catered for. The population is far too large and growing rapidly with immigration and ever increasing lifespans. Most people just try and look after themselves and their family and it's hard to blame them tbh.

I also feel like there's maybe less of a sense of community nowadays than there once was. If I were someone from the older generation reading derisive diatribes about 'boomers' I'd probs think 'OK, fuck em' tbh.

Whether the issue is race reparations, men in womens toilets, the patriarchy, etc, it does sometimes feel like all sections of society are locked in ideological conflict with each other. The media no doubt exacerbates this but all considered it doesn't really make for a society where people feel empathy and kinship with their fellow occupants or feel particularly inclined to want to help them, especially not if it's at the expense of their own offspring.

Changing rules around inheritance tax would make for pretty small fry when compared to changing the rules around the big taxes - income tax, NICs, VAT and corporation tax.
The 2023/24 forecast IHT tax raised is £7.2 billion. This represents 0.7% of all tax receipts and is equivalent to 0.3 per cent of national income.
One thing to remember is that taxes cost money to administer - HMRC employees time, IT systems, cost of court cases etc.
Personally I'd not scrap IHT but wonder if the CGT uplift on death will go. At the very minimum you'd get a base cost rollover so first disposal by whoever inherits will be a gain based on market value at disposal less the giftee's original cost.

So, for those that don't like inheritance tax but do like having a functioning health service and would like to have a care service that worked, on the off chance they might need to use it, what tax would they like to see brought in in order to finance that? Or are they happy to take their chances/go private?

@Changes17 Private.

This.