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?

I think Labour are going to try take as much as they can, no doubt they see the mc as cash cows. I only hope they don't do away with the no tax on primary residence. My aim is to pass on as much as I can whilst I'm alive to avoid inheritance tax. I believe it's been floated that RR may increase the 7 year rule but we'll see. No one gave me a leg up, it's all been hard work and sacrifice, we've paid heaps in tax and I'm not prepared to pay any more than I have to.

I agree OP, in about 2 generations, the descendants of none home owners today probably won't stand a chance of ever owning a home if house prices continue to rise out of pace with wages.

Everyone wants to of course do the best they can for their children/grandchildren but as a whole it is really damaging to society if hard working ppl can't keep pace with peers just because they didn't inherit. What's the point in spending years training to earn xxxx, when the next person can put xxxxxxxx down on a house because their grand parent happened to buy a house in London in 1980. It's not going to be possible to keep up long term - it already isn't possible to keep up in certain areas of London, and even Manchester now when the BBC moved there - you can easily find terrace houses at something like 750k in certain parts of Greater Manchester, where the average salary is about 35k.ppl aren't buying those houses out of earnings.

I get the point that wealthy ppl have always left money to their children. However this is worrying because its not just wealthy ppl leaving money now, it's normal ppl , teachers etc, who bought houses 30 years ago, so now the gap is between home owners v renters which means those left behind are far fewer in number. And rent is so high that renters are unlikely to be able to save too.

I say this as a home owner. I, like everyone, will ensure that I try and leave money to the next generation, care home fees permitting, but I recognise its not good for future society for your ability to own a home be based on whether your family bought a home in the right place or not 40 years ago.

I'm not saying that I've RTFT but you'd think people could at least read the first and last page to see that the inheritance tax rules regarding inheriting a family home have been explained approximately every 3rd comment.

Yes, wealth in the UK, and in fact most of the world, is, and always has been, largely about wealth handed down.

In fact, millennials might be the first generation to lose out on en masse to this due to the increasing issue of care home fees and the ability that modern medicine has to keep people alive way beyond their years of being able to live independently.

There's no inheritance tax on a property left to children or grandchildren

You certainly keep the extra if you move into a care home, so presumably you do if you downsize, but it’s not something I’m 100% sure on, so it’s worth looking into it to be sure.

On second thoughts, this opens the door to downsizing, giving away the excess, then claiming that amount as a tax free allowance, which doesn’t work! I am afraid that, I think that unless it was a home within a care setting you would loose the RNRB ( residential nil rate band).

The Labour party are stupid if they are going to go hard on inheritance tax because the people most affected will be hard workers who have saved all their lives and their children. The Elon Musk/ Duke of Westminster types have so much money, it will barely make a dent but for those who have strived and worked hard and saved to the point it would make a big difference to their children, its a huge destroying impact.

If inheritance tax is made too high, what will happen is people will not want to pay it (or more accurately, not want their hard earned savings which they wanted to give to their children or charity or their great aunt in penury going to the government) so rather than save it, they will spend it post retirement and this will have two major impacts

• it will decrease inheritance tax recovery as people will spend to avoid it - if it's too high, it will have a similar effect to the Laffer curve - as in if income tax is too high, people stop working as there is no point.

https://en.wikipedia.org/wiki/Laffer_curve

• it will increase state care costs. People are living much longer, the longer you live the higher the chances are of dementia or serious physical infirmity and the cost of care is astronomic. if the 'avoid my life's work going to the government so spend it while you can' crew do that because of stupidly high taxation, the government will be losing doubly as the state will have to bare care costs - whereas under a moderate regime, people are still trying to preserve assets for their children to pass on. So if they unexpectedly need care, those inheritable assets can be used to pay for the care.

What could, and does happen, is that the Boomer parents are outliving their Gen X children.

this is really depressing.

My DS was learning about this/discussing this in his A Level Economics this week - on balance it was felt that ‘inheriting’, probably not until his generation are in their 40-50’s (from parents/GPs as we all live into our 80s) was compensation for crippling student debt, low starting wages and the inability to get onto the property ladder due to inflated house prices. Ie. They will have kind of earned their inheritances and may be able to use it to clear debt and finally pay off exorbitant mortgages. I kind of agree, though I am hoping DH and I will release some of that ‘inheritance’ to them before we die so that we can see them benefiting from it while we’re alive.

IHT relies on people being in denial of their own mortality or being unwilling to do succession planning. I do feel some sympathy with elderly people who have lived in the same house for 40 or 50 years. It’s not their fault it’s now hugely valuable and that, consequently, failure to downsize more than 7 years before they due will mean children and grandchildren lose out on substantial and life changing amounts of money. My own parents live in a not very valuable corner of England so it isn’t with a fortune, but it’s a beautiful house. In the Cotswolds or London commuter belt it would be worth a lot. It is the house where I grew up. My mother is very clear that she will only leave in a coffin, and I fully support her in that. But I can see how it might cause inter generational resentment.

@Genevieva Thanks. I wasn’t asking for personal reasons, I was just curious as whether the current system is a disincentive for older ppl to downsize and possibly negatively affects the housing market?

A widowed 80-year-old may not be managing well or even want to continue maintaining a three or four-bedroom house, it would be better to sell it to a family-but the older person may feel that they need to hang onto it if it’s advantageous tax-wise for their children.

Yes I'm in Ireland where housing is also massively expensive.

A decent salary like a teacher for example cannot afford an ordinary house in Dublin anymore. Ex council houses are going for 500k and upwards in our "up and coming" but still very salty area. Well off people living in houses built for poor people who in turn will rarely get the opportunity to buy or live in stable council provided accommodation.

It's madness.

@Genevieva im not sure it’s just that. My parents live in Sussex in a house they bought 40 years ago and is obviously worth a lot more now. They also owned a successful business and are comfortably off (although not the super rich). However, they have been nervous about giving large sums away because they have seen how effectively care burns through money and want to ensure they have enough to support themselves in very old age.

Lukcily DH and I have good jobs and have earned enough in our own right, so I won’t rely on it, but I’m hoping there will be something to pass on to my children. But I also would want my parents to enjoy their later years.

i wouldn’t dream of expecting my parents to free up money by leaving the house they love just to give money to me.

This is definitely the case, but it’s not really new. The UK has had massive inequality since forever.

Yes, Thatcher’s massive property giveaway means that some people hit the jackpot and got rich through property at the expense of the very poorest in society who now line the pockets of landlords because there is no social housing for them.

However, it’s a blip really in the overall pattern of inequality in this country.

No you would lose your ability to pass on the max amount tax free. It’s why it needs to be changed. It actively encourages people to rattle around in houses that are unsuitable / too big just to make the most of inheritance tax reliefs.

Yes - it appears your extra 175k is only protected if you move into a residential care home. Madness really. Some old people want a simpler life and want to give money to their children now, so they can enjoy seeing grandchildren growing up in a house with a garden etc. taper relief means your children would have to set aside 40% of the gift incase you die and they have to pay retrospective inheritance tax.

@Genevieva @Singinginthespring

Thank you both for answering the question. So from a tax perspective, there’s no incentive to downsize, more the opposite, even if your house is far too big for your current needs and is a lot to maintain.

I think it’s closer than 2 generations away.

Our society’s attitude towards home ownership has changed beyond recognition in the last 3 generations. Before WW2 a lot of people got housing with their job. Eg the bank manager lived in the house attached to the bank, the postman lived in a house that belonged to the Post Office, the policeman often lived in a house called Truncheons, the schoolmaster lived in the house by the school, the vicar in the vicarage…. I could go on. Before WW1 half the population were in service. Property wasn’t an appreciating asset and accommodation was provided with a lot of jobs, so people didn’t aspire to own houses as they do now. Home ownership
as. Right if passage is a post-WW2 phenomenon.

Yes there is. That’s the whole point of inheritance tax.

I think Labour ought to have a look at Trusts. Although it's not correct to say no tax is paid on them. They pay on a 6 yearly cycle rather than a lump at the end of a beneficiary's life.
As a country we are unusual in having such an arrangement.

This is so true. My parent's estate paid a lot. But my in laws managed to leave everything to 6 grandchildren. House, savings, investments. Retired teacher and naval officer. Zero IHT.

People don't understand for that for most it's a completely academic exercise. Add to that the people who pass on businesses or farms - all exempt - and it's a tiny number of people who pay.
We will. Big time. But that's ok. I also expect to have decent public services paid for.

You’re just in the wrong job

You don't have to be in a residential home for care costs to eat a hole in your money. Before my mother died a few years ago, she was paying £500 per week for one and a quarter hours of care each day. The rest of the time, all care was down to me. I dread to think what the rate would have been had I needed more help to care for her. £500 a week eats into any money you might have (and she wasn't rich by any means, just above the threshold) at a frightening rate.

I am in the southeast and all I seem to hear from millenniums is how much they will get when family die! Now I worked really hard, studying for a Madters degree and went through single motherhood at the same time. Eventually working my way up from poverty to a decent 100k a year job. Never ever have I considered what I might get from my 78yr old parents. It’s their money. They earnt it. They should spend it. Likewise. I am retired at 50yrs old. Have a house in the uk and a holiday home I spend 6 months in Spain. I (well we- my husband as well) earned it all. And we intend to spend it all. I was shocked when my millennium daughter and step son started talking about what they were ‘entitled’ to! I told them both quite straight..you haven’t worked hard, you spend your money on crap and you are not motivated to get a career. So tough. Go do something to make your own fortune. Never the less, they will profit off our backs but it shouldn’t be an expectation!

Let's have a guess where YOU live ...........🙄

If its not London I'll eat my hat.