To think the Uk will move to an iheritocracy

[nappyvalley1992]

In the UK (especially the south east) PAYE earnings seem to increasingly play little part in overall wealth and what matters more of background/family wealth and increasingly the only path to a comfortable middle class life is via inheritance.

I am a late millennial of the south east whose parents own a very average home worth £1 million which under current rules I should inherit tax free. It's a similar story for almost all of my friends (amount almost equivalent of a lottery win). My parents were not even very middle class and had average jobs, they have just got lucky through house price inflation. Its not often spoken about, but I can foresee a wave of very wealthy millennials emerging in the next 15-20 years, and increasingly it wont really matter what someone earns in their day job, the biggest determinant of wealth will be those who are lucky enough to inherit.

Some millennials might even inherit large sums 2 or 3 times via grandparents, and inheriting from parents on both sides of the couple.

Will the government eventually start taxing inheritance more or what will the future look like in this area?

Around 5% of the population end up in residential care, even with an ageing population it’s nowhere near going to be 50%.

The Financial Times did a piece on just this subject, millennial versus millennial recently regarding inheritances.

What you also need to consider is you are in the overheated SE and it’s all very regional. Our home in DH home area would be around a million, where we live it’s worth 300k.

Anyway don’t worry your parents are exactly the kind of people Starmer is after.

Less than half means nearly one in every couple, so that means virtually every potential inheritance is affected.

RTFT.

Why? It's built from previously taxed money.

I don’t think you can avoid paying IHT on the house if it’s £1m.

Nope that’s wrong. Perhaps this is why so many get annoyed about IHT if they don’t realise the actual max threshold is 1m?

I'm not so sure https://www.alzheimersresearchuk.org/news/wealthy-linked-reduced-dementia-risk/

Hopefully the government will start doing what the US already does and tax people overseas if they want to retain their citizenship (or they can give it up, but not be allowed back into the country if they find the grass isn't actually greener).

My thoughts are more with all the young people still living with parents, unable to afford a house. If their parents are renting, where will they go?

Although you've forgotten the small issue of climate change...everyone just talks as if that's not happening.

It’s generally not because in parts of the country there has been huge equity gains. My in-laws paid 60k for a house in the 80s, 1.6 m today.

London property is already an iheritocracy.

but I think any government is going to come for that housing wealth in some form. The country is broke & we have an ageing population, more people are going to need care & care is going to cost more.

Isn't it already? It's always been about wealth and who you know - the idea that we are, or were ever, some kind of meritocracy is laughable.

By the time most people inherent it's way too late to make a difference to their lifestyle- once both parents are dead, most people are in their 60s. What makes a huge difference though are gifts - especially a deposit for a house, having had university fees paid, so no student loan, regular, reliable help with childcare maybe makes the biggest financial difference though, both in terms of money saved and the kind of careers it enables (like going on work trips).

A care needs assessment will be done by the local authority, taking into account their income and capital assets, not including the value of their home, even if it's worth millions. Their house does not get sold / a charge put on it, unless they are not living in it.

I think this will change though.

So why is everyone on the Inheritance Tax thread in Money Matters moaning about how unfair inheritance tax is? That's an enormous amount that the beneficiaries can receive before any IHT is due

Many people don’t understand it.

By the time most people inherent it's way too late to make a difference to their lifestyle- once both parents are dead, most people are in their 60s. What makes a huge difference though are gifts - especially a deposit for a house, having had university fees paid, so no student loan, regular, reliable help with childcare maybe makes the biggest financial difference though, both in terms of money saved and the kind of careers it enables (like going on work trips).

Our gifted deposit came from parents inheriting from their parents. Any inheritance I get will be for my dc.

@thepariscrimefiles because people don't understand what @Sophiesaph24 correctly states. Of course that only happens if a spouse's estate passes to the other and then to their direct descendants.

Whatever the Government does about IHT I hope that they will focus their attention very much on the loopholes available to those whose wealth is not tied up in the value of their home and who have the ability to manoeuvre around a great deal of IHT (agricultural land etc). I have no skin in the game as I won't inherit btw but I still think the focus should be on closing the tricks rather than taking away some of the allowances. It does seem likely the Government will extend the 7 year thing to 10 years and look at the loopholes which I think is a good thing. It seems unwise to tot up any inheritance as there is so much that can happen to completely wipe out the kind of inheritance levels being discussed here.

Whatever the Government does about IHT I hope that they will focus their attention very much on the loopholes available to those whose wealth is not tied up in the value of their home and who have the ability to manoeuvre around a great deal of IHT (agricultural land etc)

They should do this but I don’t think they will.

My parents split up and so both own their own homes, but my DD is 22 already and has four cousins. I'd expect that they will share most of the inheritance between the five of them, and then maybe more. My parents might live another decade or two and there might be great-grandchildren to pass any inheritance onto as well.

What makes the big difference is having parents who are wealthy enough to help you skip renting for a couple of decades. Inheritance from parents who are accidental millionaires from the house price boom will come too late, and be split between too many, to help many with that.

I'm 44, and might buy a house soon, but I've done a lot of renting before now and an inheritance from my parents will come too late to change that.

Why don’t we tax more like America? As in you pay the tax due wherever you live.

Inheritance from parents who are accidental millionaires from the house price boom will come too late, and be split between too many, to help many with that.

Thats not strictly true. I have friends whose parents downsized & gave them deposit many that way. Another set of parents did some equity release thing because it reduced their IHT liability & helped their dc now.

The share of the UK population who occupied a rental apartment decreased gradually since the 1980, but started rising again after 2003. As of 2022, 35.7 percent of the population rented, with the majority renting from a private landlord. Approximately 16.6 percent of the population were social renters and rented from housing association or a local authority.

You move in a small social circle.

Which equals £650,000, so you will still pay 40% on the rest

Most of that inherited property money will go back into property though.
I have inherited about 300 which has been a big help in affording my small 3 bed semi worth about 750. I’ll need to downsize to help my DC with 100 each to help them buy a 2 bed flat.
As it is my 3 DC are living with me in their 20s as is standard for London.
It’s not like most people can spend it on cars and holidays. And yes I know it means my children will be a bit closer to that 350 two bed flat than others who don’t inherit.

Ok, didn’t read the thread and have now seen this has been answered!

@Fieldofmush The US is one of only three countries (the others are Eritrea and Hungary) that tax their citizens regardless of where they live. My BIL and his wife have lived in Asia for years and file their American taxes every year, even though they don't owe anything as there's a reciprocal tax agreement with their country of residence.

It's a waste of people's time and money. They pay several hundred for the annual filing, only to be told that they don't owe anything.

'Which equals £650,000, so you will still pay 40% on the rest'

FGS NO, so much ignorance on this topic. See below:

www.moneysavingexpert.com/family/inheritance-tax-planning-iht/#whopaysitax