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?

@Fieldofmush Terraced or Town houses mainly.

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.

Dream on OP. You sound very naive.

It’s just an average of all property. It can’t be mainly terraced or town houses 😂 it is all registered residential property, so certainly doesn’t reflect the price of the average “large family house” which will usually be the most expensive property in that average mix

The problem with the gifting rules is it also tends to favour the very rich. If you are 60 and have 5 million, you can pretty comfortably give away (say) 3 million, with the knowledge that the 2 million remaining will pay for any care.
If you have 1.8 million (for example), you’re still going to be subject to IHT but much less likely to want to gift, because you’ll want to make sure you have enough for your own care needs.

@AquaPeer Of course it does not represent the price of the more expensive houses.

The majority of sales in South East during the last year were terraced properties, selling for an average price of £403,556. Semi-detached properties sold for an average of £463,808, with detached properties fetching £730,453.

Where are the flats? Are you mixing up sources when you’re googling? This doesn’t make any sense, and it’s part of my job 😂

I googled and the quotes are from Right Move. Find better sources and post them if you want.

I know some people who have done incredibly well financially and are entirely self-made. So, I think the kid of hereditary and earned income will continue much the same. Also, I don’t object to inherited wealth. I want my pen children to enjoy the benefits of my hard work when I die. After all, they also put up with having a hard working Mum who couldn’t always watch their sports matches or help with homework.

OP, IHT threshold is only 325k !?

Why do you there won’t be IHT on a £1M house?

Excuse the typos. Fat fingers.

OP, IHT threshold is only 325k !?

how many times!! 🤦‍♀️

Look at the Sunday Times rich list. The lords still have their land. And their wealth. Inheritance tax is only paid by workers.

Nice article from 2017. I bet the wealth has gone up since then.

https://www.businessinsider.com/sunday-times-rich-list-2017-aristocrats-that-are-richer-than-the-queen-by-net-worth-2017-5

+£175K per person leaving their house to their kids. Times 2 for 2 parents. But this has been frozen since 2010, when Cameron won the election partly on the promise of abolishing inheritance tax. He reneged but gave this small sop. Had the £325K risen with inflation it would now be c.£500K.

Ok I might have made money from my house in the south east. But I don’t have Shares, a large pension, bonuses etc. To live comfortably at retirement I will have to release money from my house - detached in south east valued ( just sold at £520k). No where near the £1m. For some of us our houses are our pensions.

There will not be a wave of very wealthy millennials.

Most people will be splitting their inheritance with siblings and other relatives.

And that's if they get anything because people are living longer and their houses are sold to pay eye-watering care home fees or at home carers.

Even if that doesn't happen, many retirees are choosing to spend their disposable money on leisure instead of upkeep, so a lot of houses are worth considerably less with their 30 year old bathrooms and knackered windows and driveways. Takes at least 100k off the price once you factor all the repairs in, more like 200k for a 1m house.

Then you have all the fees of selling the house, and all the costs of removing all the stuff and disposing of it.

that’s fine, but IHT threshold is still £325k right? Or is it expected to go to £500k ?

We don’t have IHT here in Australia and I can’t see it makes a huge difference to anything. House prices are high but no more so than the U.K. and it’s mainly caused by a lack of building and massive immigration over the past 15 years.

Although to be fair, the boomers are only just starting to die off so maybe there will be a big shift in the next 20 years.

How is the child not benefiting? You do realise that with a half million inheritance they would still receive approximately £430,000.
Alternatively you can alleviate the problem by enjoying your money while you’re still alive and leave your children to sort themselves out.

I'm ea

Where we live there are terraced houses that sell for nearly a million. It was more before house prices dropped.

@Ozgirl75 Yes, I've also wondered how the housing situation will shift over the next 20 years. The Boomer generation ranges from 59-78 years old so it'll be a while, but they own a lot of properties.

It’s £325K for everyone, plus an extra £175K if you have a house and leave it to your kids. Total £500K. This means that an estate of £1,000,000 that fulfils those criteria left by a couple pays no inheritance tax. If it belonged to one person who leaves their house to their children it pays £200K IHT (an effective tax rate of 20%). The same estate belonging to a spinster with no children or held in shares, not property, pays inheritance tax of £270,000. An extra £70K! It’s grossly discriminatory.

If your estate is more than a million, you start losing the extra £175K pound for pound until you are back to £325K. So an estate belonging to a couple that is worth £1,700K and includes a house left to the children only enjoys a tax free allowance of £325K per couple (£650K not £1 million). This means it pays £420K (a marginal IHT rate of 60% on the amount over £1 million).

The system has become monstrously complicated and expensive to run. Probate is now taking years to be granted because of backlogs. Beneficiaries have to take out a loan from the bank to pay the inheritance tax before they can distribute the estate. If they want to sell the house and they don’t succeed within a year then they start having to pay interest on the loan. There’s a strong argument for abolishing it, like Sweden, Denmark, Australia and New Zealand. The argument that it levels out society is fallacious because the very rich don’t pay it. Their wealth is all tied up in trusts, businesses and offshore accounts.

Do they😕

@Goldenbear I was thinking of someone like Elton John who established an AIDS foundation. You can definitely give away money if you wish to.

@Genevieva You sound as if you understand how it works-can you answer my answer my question from upthread about what happens if ppl downsize?

So if her parents downsized next week and bought a cheaper retirement flat, would the OP still get exactly the same IHT break regardless of what the property is worth? Even if the flat was worth 200K and they had 800K in the bank (from selling the house), for example?

Does the value of the property matter for the £175K exemption? What if the flat was worth less than £175K for example?