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?

But no tax has been paid on it, or the profit on it, by the inheritor.

Isn't it all going to change come the budget anyway?

@nappyvalley1992 What happens when you sell the house? How much tax do you pay then?

If you sell the inherited property at the same market value then no tax is paid. If there is a profit then I guess capital gains tax will be due.

I doubt anything significant. There is talk of change to gifting rising to 10 years (from 7) and taxing overseas inheritance

How old were your parents when they had you? I was in my early 20s when I had Dd so (hopefully) she will be In her 60s when she gets any inheritance? What does she do till then, she will have to make her own way.

i was in my late 30s when my mum died, she left about half a million shared between her neighbour and a woman who she went to school with who she hadn’t seen in 40 years 🙈🤷‍♀️😁. Don’t assume anything.

Agree. I have already decided that the majority of any inheritance from my parents will go straight to my gen Z children. They will need it more than dh and I, who were lucky to get on the housing ladder in the late 90s.

and taxing overseas inheritance

Seems a bit rude to tax the proceeds of an estate that isn't in your own country.

They should make it easier to gift, not harder. Should be able to gift 10k per annum. Better for the economy.

This is where the impact of care fees come in though-

grandparent A leaves £1m to her 2 children. Her children are married, so 4 people share this. Let’s say 1 of the 4 end up in care home- fees £200k.

£800k goes to the children of the 4- say that’s 8 people. 3 of those people have care home fees to pay before death of £200k each.

that reduces the “pot” to be passed to the great grandchildren to £200k. The generational wealth is likely to end with them.

OP - it's a good point that needed making. When I cast my eye round our cul de sac I can see a dozen couples in their 50s whose houses (and second houses) are worth over half a million each, and see their children in their 20s/30s who have already inherited from grandparents and will then get the next property windfall. My kids won't benefit much from that as our parents left us nothing and our house is still mortgaged (splitting up due to divorce so buying 2 very small places). And I think whats going on here is just a very modest tip of a massive iceberg.

So yeah, going to be a lot of "haves".

This was supposed to come in next year but was one of the first things to be scrapped when current Government got in.

I think inheritance tax is immoral for those who have worked and paid tax all their lives, then saved so that their children can benefit. I would much rather Labour find a way to tax the super rich who only pay the lowest levels of tax.

I mean you basically have to do this, although in most cases there is a double taxation treaty so you only pay one set of IHT. I have just done this. You wouldn’t change a double taxation treaty for this

@Blanketyre I don't understand. Why would having to live 10 instead of 7 years after making a gift (to avoid inheritance tax) make it easier to gift or enable ppl to gift more?

Less than half of people go into residential care. This is often overstated

And even then I think the average length of stay is approx 13 months according to a study I read.

No because its already been taxed by the originator of the money, its then gifted to the inheritor. It isn't earnt at that point, there is no profit it is gifted, it will be taxed again once it is then used by the one inheriting so it seems counter intuitive to tax it at the point it is handed to its next set of hands.

@AquaPeer Yes, I believe that double taxation treaties exist globally. That's why my BIL and his wife feel annoyed at having to waste money filing their American taxes annually, as they never actually owe the American government anything! Their country of residence taxes them instead and has a treaty with the US.

My dm's friend just spent nearly a year in a care home before her death, £6300 a month! She still had almost half a million left but that would've only been enough for around 7 years. No one should count on an inheritance although that is where most of my dps money has come from, and I know they'll be keen to pass on as much as possible...

I suspect she will get rid of the residence nil rate band completely, stop pensions being passed on free of IHT and also get rid of agricultural relief.

Not unusual in your peer group but in mine few have inherited or will inherit.

My parents own a £400,000 house in the North but I never think of inheritance as a given, especially as my family tend to live well into old age and many have gone into eye wateringly expensive care homes.

2.5 % of over 65 year olds live in care homes, if you look at the over 85 year olds it's 10.8 %. In addition the median stay in a care home is 462 days. So most people don't end up in a care home and those that do are unlikely to spend the entire value of their house on their care because they will die before they do so.

IHT is an obvious target if you're looking for more tax revenue because it targets wealth rather than earnings. But rather than reducing the allowances there should probably be a change in how you inherit, maybe a personal inheritance allowance that allows you to inherit X amount before you have to pay inheritance tax rather than an a percentage of an estate. Something that incentivises rich people to distribute their wealth when they die. But as in all tax issues the law of unintended consequences should be looked at. Everyone wants to hold onto their money and everyone will try and find the loopholes.

That was kicked into the long grass!

Greed, essentially.

DM’s estate is likely to be somewhere around the IHT threshold, I’m more than happy to be taxed on it. DBro and I haven’t earned it (and as it happens, neither did DM - it’s a combination of massive life insurance payout when DF young, and house price inflation).

It’s not about making it easier to give money- it’s more likely that they will die within 10 years than 7, thus the inheritees will have to pay IHT!