Inheritance tax to be halved

[WildWhippet]

The government intends on having the rate of inheritance tax in the autumn statement.

Is this a good move? Will it encourage you to vote for the Conservative Party?

This.

Inheritance tax is expected to raise £7.2 billion for 2023-24. Which is 0.7 percent of tax receipts.

The NHS costs £181 billion per year so only a tiny amount of that.

My neighbours gifted their £2 million plus house to their DC in 2015 to avoid inheritance tax. If IHT was around 10% the vast majority of people wouldn’t bother to try to avoid it.

Seeing as there's now no maximum pension holding limit, surely the best way to avoid IHT is to make yourself as liquid as possible and then put it in a pension wrapper and name whoever you want to inherit as your beneficiary anyway?

Being a kid of a small business owner is no piece of cake I can assure you. Rarely any holidays, often having to work in the business from young teens. Often the whole family is involved. All to try and improve the prospects of the family and to leave to your offspring.

IHT was originally created in order to tax the landed gentry whose families never paid tax as the vast wealth just passed down generation to generation.

As the thresholds have not increased in line with general inflation it now captures people it was never intended to.

Almost everyone, including most of the posters on here, are deeply ignorant about IHT, which is not surprising as it is a highly complicated tax. Until relatively recently it brought in very little revenue, as it is an expensive tax to collect, due not only to its complexity but also the historical info required in some returns and the fact that if assets are not sold following a death valuations have to be obtained by the deceased's executors and agreed by HMRC. The freezing since 2009 of the "ordinary" nil rate band at £325,000 has brought many more estates into charge and the legislation on the "residence" nil rate band is a nightmare. There are also convoluted anti avoidance rules. All that complexity and the need for valuations soaks up a lot of HMRC brainpower and the system is creaking under the strain. There is a good case for saying that that brainpower could be put to better use elsewhere in the tax system.
Yes, it is undoubtedly easier for super wealthy people to avoid IHT by making gifts more than 7 years before death than for those in the merely comfortably off bracket. The former can give away a great deal of wealth whilst being at little risk of running out of funds in their lifetimes, the latter have limited scope for that. But, generally speaking, CGT is paid in connection with a gift, either by the donor selling assets to produce cash to give away or because a gift of an asset other than cash is a CGT disposal, so it is not generally the case that the super rich escape tax entirely on passing down wealth. Indeed if you get it wrong by making a gift shortly before death, you could end up paying a great deal more in IHT and CGT combined than you would have done by holding onto everything until death.
The whole system is a mess and needs a radical overhaul or IHT needs abolishing and CGT needs to be charged on death on gains not taxed in life.

It could do with proper reform, it's so easily avoided. Abolish the tax entirely, and instead apply CGT as and when the assets are sold. Also revert CGT back to Nigel Lawson's set up where it was set to the same rates as income tax, but with an indexation allowance. That should net the Treasury more money, stop people having to sell granny's house if they don't want to (the tax only applies if/when they do), and it would remove the incentive for multi-millionaires to buy up farmland as a tax dodge.

I agree with all of this. I do wonder how much the administration of IHT actually costs.

History has shown that raising taxes often results in lower overall revenue to HMRC as more people seek to avoid them or move themselves or their money and assets abroad. Reducing taxes encourages investment and helps the economy resulting in higher revenues for HMRC.

My hope is that a reduction in the rate will reduce the value of farmland. The current price of land is way in excess of the land's agricultural value, in part due to wealthy people 'land banking' to save IHT. As someone else mentioned, many of these people have no experience of farming and are 'pretending' to farm to gain reliefs. In the south-east, this behaviour has taken thousands of acres out of food production which is an appalling waste of a valuable resource.

If they abolished IHT and applied CGT as and when assets were sold that would mean that assets handed down from generation to generation would escape tax entirely. Lovely for the landed gentry!

Sorry but I just don’t see those things as reasons to either scrap or reduce IHT. It doesn’t even kick in before £1m for a couple. Recipients receive all of that first £1m and 60% of everything above that level. That’s extremely generous to the recipients in my view.

If small business owners prioritise their business to the detriment of their children like you describe, that’s not something that the tax system should pay the kids back for when those business owners die.

@Shakeylegs its not about paying the kids of small business owners back after they die, Business Property Relief is intended to preserve businesses for the future - to generate future profits which can be taxed - instead of their having to be sold or broken up to pay tax on the owners' deaths. Same for Agricultural Property Relief.

Just another rubbish proposal by a truly rubbish group of people. Stinks of desperation.

Being a kid of a small business owner is no piece of cake I can assure you. Rarely any holidays, often having to work in the business from young teens. Often the whole family is involved. All to try and improve the prospects of the family and to leave to your offspring.

Is this for real?

According to the IHT rules I can give £250 as often as I like as gifts to whoever I want to - children, grandchildren etc. to get down to the threshold. I am planning to do this as a gift of £250 now as the they receive the full amount rather than £150 they would receive once I have gone.
Can also give larger one off amounts but only once a year.
DH is quite happy to pay IHT as goes to hospitals, schools and benefits to those in need (or parties at no 10, lady mone, etc)

Ag property relief is a swizz!!

So many rich people buy farmland etc to do dodge iht. DH works in private wealth management and all the senior partners seem to have all their wealth tied up this way. Flocks of sheep etc.

None of them actually farm as their source of income. They are city boys earning 300k a year from that. Often the farm stuff is barely break even but it means a chunk of value can be passed on tax free.

History has shown that raising taxes often results in lower overall revenue to HMRC as more people seek to avoid them or move themselves or their money and assets abroad. Reducing taxes encourages investment and helps the economy resulting in higher revenues for HMRC.

Bollocks. Scandi countries have higher taxes than us.

If the economy is massive but poorly distributed, the vast majority of people are worse of than with a smaller economy more fairly divided. Distribution via taxation is essential.

Seeing as there's now no maximum pension holding limit, surely the best way to avoid IHT is to make yourself as liquid as possible and then put it in a pension wrapper and name whoever you want to inherit as your beneficiary anyway?

Its still your pension fund & part of your estate.

I actually disagree with IHT but think this is completely the wrong priority at the moment. Pretty much like everything else they are doing. No attempt at actually fixing any of the many serious issues that are going on.

Thought it was on the amount of the estate, not how much beneficiary gets?

I agree @EsmeSusanOgg, the threshold set in 2009 now impacts far more people than was originally intended. You’d need nearly £500K in 2023 to have the same buying power that £325K provided in 2009.

It's always billed as a tax on wealth, without taking into consideration price paid, mortgage interest, repairs, whether price has even gone up etc. If it's a tax on the surplus increase, then do a much lower flat rate across the board, with a lower threshold. Otherwise, isn't it a tax on the south east and not a tax on additional income? It's a shitty tax anyway.

Oh no not a tax on tne South East! The horror!

As a Londner who owns a property I am very relaxed about my estate being taxed when I am dead. Mainly because I'll be dead and won't care.

I am more annoyed at the moment about tbe fiscsl drag caused by the 40%tax rate threshold not being increased for years.

Not much different from the current situation then. Bringing CGT back to the old rates would primarily hit the wealthy because they are more likely to be due CGT than poorer people who have no assets. The revenue take for the Treasury would be greater, which is what really matters.

There would be no need for various reliefs that can be exploited by those for whom they were not intended. So no more millionaires buying up farmland purely as a tax dodge.

4% will benefit from this, they said on the radio this week. And then they said that a much higher proportion think they will benefit from it!

They now have the RNRB which has taken into account the house price rise.

They've dropped tampering with IHT now. Allegedly. They seem to be going towards cuts in business taxes, and getting the sick and disabled into work.🙄

@ruby1957

if you don’t have children and are single then you only get the £325k allowance so tax is 40% on the £275k excess.