Inheritance tax in anti-Labour

[iphi48h]

In expectation of the budget it got me thinking - why isnt Labour aiming to tax those who have trusts and are substantial asset rich rather than grandparents who live in London and are cash poor but own their hose. Is it because it's easier or because they dont actually want to tax those who really are asset rich?

Most of my friends whose parents were working class or lower middle class barely have any savings but do have a house in London (we all live in London). Most of my friends whose parents were always middle class have multiple pots of savings, properties and very good accountant - so they will never pay the inheritance tax.

We all live in London and unless you have help from your parents - it's very hard to buy a property. I think a lot of my friends do expect some inheritance from their parents to pass to the grandkids to help them buy a house. But the difference is that those who have always been middle class will be able to do that, those who basically dont have clever accountants and family experience of managing wealth will be taxed. Is that fair? Are we basically taxing people without clever accountants? Why not go for the trusts and clever financial schemes if you want the true middle and upper classes as well as large funds to pay up.

I do think inheritance tax needs to be increased and I do think that would include people who have homes that have massively increase in value but I also feel like they need to go to the loopholes about inheriting farms and all the other nonsense

Sorry to quote myself but I just wanted to add that most people would have paid around £60k in interest if the house was bought with a mortgage. Therefore unless you had the money to buy the house outright and if you take the average interest rate over the past 30 years then the cost of owning the house was never £90k but closer to £150K.

Factor in inflation and interest and suddenly it doesn't seem like you are sat on quite as much 'unearned wealth' as it initially seems.

You want the government not to tax you because you took a loan and paid interest?

Strange

Most people dying off now bought homes in the 60s and 70s

A home bought for 4k then would sell for around 60k now if homes had risen with inflation , but will in fact sell for around 300k

That's are 240k unearned wealth to my mind

IHT is disgusting. Leeching off the bereaved at a traumatic time. I had to pay shy of £70K in IHT, which must be paid before you can apply for probate. Th bank account with the funds to cover that cost would not release the funds without probate so even though the money was 'there', we still had to incur fees and interest to even get the ball rolling, the probate office is a shit show, and on top of that, there is the mortgage to be paid and legal costs. There is nothing left. I have just been a pen pusher working for free by the government for the last three years (that's how long it took to get probate). Whilst I appreciate not everyone will experience the same, I am not th eonly one who has had to formally complain about the system and how it treats people.

Ah, so £1m is not rich enough. It's the age old - "tax the rich but lets define "rich" as someone who is richer than me"

do you define everyone in London rich so long as they own a house? Shall we have a regionally divided IHT?

Yet people still believe that Labour are the party for the working class.
That ceased long ago.

If you were left an estate that had £70k of IHT, you must have inherited a significant amount.

If my parents died tomorrow, my sisters and I could inherit £1m (between us) completely tax free.

If the estate you're talking about wasn't eligible for the £1m tax free, it would have been at least £325k tax free, then the £70k would have been 40% of the rest, so £325k + £105k (the remaining 60%) left after IHT.

I'm suggesting that all this talk about 'unearned wealth' isn't taking into account the true cost of ownership. So the house she bought for £90k in 1994 probably cost her closer to £150k due to the interest she would have paid. This is an objective fact and something people often forget when they seek to calculate the 'profit' they have made on their house. Likewise inflation is often forgotten. It is very relevant because the combined impact of inflation and interest could mean that the poster with the house worth £350k has actually in effect already paid the equivalent of this amount with earned income. She would in effect be being taxed twice if you were to apply IHT.

Someone who bought a house in the 1960s or 1970s is likely to have accrued more unearned wealth from their house but it is wrong to assume that this is true for everyone that owns a house and dies. The system would have to be quite sophisticated to calculate what truly was unearned wealth and what was just a nominal increase in house value that in real times does not increase someone's wealth.

My concern is that the 'wealthy' lower middle class will soon end up with very 'poor' grandkids.

I sometimes follow some journalist writing about housing - renting and buying - mostly based in London and they say it's getting easier to get stories about accommodation issues published as the paper owners and editors have started to realise their kids and GC are struggling.

We've moved to cheaper areas of UK - those are rapidly disappearing - so no idea what the answers are.

I suspect inheritance will be eyed up because they need more money from somewhere - it's easy to see - and backlash may be more muted and dispersed than if they raise other taxes - house and inheritance envy is already a thing. They'll probably do Gordon Brown's trick not raising thresholds so more get caught up in paying it on top of any new measures.

If you are divorced, like I am, you get £500,000 IHT allowance, the £1 m is only for surviving spouses.

I keep reading that only 4% of the population pay IHT, yet I certainly don’t have a very high income! When working, I was a teacher and worked my way up to become a department head, I think my salary was less than £40 k in 2018 when I retired at age 60. Once my children left home, I spent the final 13 years of my working life saving hard to build up decent retirement savings. I now live of my pension ( from two previous careers, some part time years and some stay at home years) ) which is not quite enough to cover all my expenses so I dip into my savings for one off large purchases. I paid off my mortgage in 2000.

My bungalow is worth around £650,000 now, I bought it for £400,000 in 2010 so it’s has gone up a lot and is over my IHT limit, my savings obviously add to the expected tax my children will need to pay.

Am I really in the richest 4% of our population? I suspect there are far more people with more money than me!

@@Ihateslugs exactly - if you include property then most people in the South East will pay IHT. However, it might be that your money gets eaten up by care costs. My assumption is still that a loft of the middle classes must be getting away with not paying IHT. I dont know anyone in London whose parents i.e. in their 70s/80s dont own their house. So surely they will all pay IHT.

@wednesday32 nothing left, really? IHT is set at 40%, and there is a significant nil band, so how have you managed to fuck that up?

"rather than grandparents who live in London and are cash poor but own their hose."

So are you arguing because someone chooses to hold all their wealth in assets they deserve not to be taxed, but someone else holding it in cash does ?

Houses are great to tax. Because they are pretty much immovable and the government can find them easily as they exist on lots of national registers.

Lol! If that poster inherited from married parents and the estate included a property, they can inherit up to £1 million free of IHT and only pay 40% on any inheritance over £1 million. Therefore, if she paid £70,000 IHT, the estate would be worth about £1,180,000, leaving her with £1,110,000.

As someone who just paid 40% tax on a work bonus of £500, my heart fucking bleeds for her.

How do you know that they don't also pay 40% on their work bonuses or that her parents didn't pay 40% tax on the income they used to buy their house?

I think people forget that it often is true that the same people are often taxed through different taxes rising. Labour bleat on about not taxing working people but the reality is that lots of working people work extremely hard, make massive sacrifices and take on extra responsibilities and promotions to boost their earnings in the hope that they can build a secure financial base for themselves and hopefully pass something on to their kids. This is in everyone's best interests as financially secure people are less likely to require state assistance in times of crisis or as they age and become unwell. Social care for the elderly is especially expensive and it is important that as many people as possible self fund.

The problem is the incentive to save will lessen as IHT and care home fees look to hoover massive amounts of money. It's also harder to build this nest egg in the first places as CGT increases will erode gains from investments, ISA allowances are cut and most people now rely on some inheritance to raise a deposit for a home (IHT will make that harder).

So the government won't directly tax working people but they will make it extremely hard to build any real wealth and to benefit from any meaningful inheritance.

It's not the income they used to buy the house that is the question

It's the wealth that house accused way above inflation rates

It's the fact that the person paying the tax is the person who is gaining something unearned by them

You pay tax when you buy something and the people who created it also pay tax on their income - because it's different people

"If you are divorced, like I am, you get £500,000 IHT allowance"

Yes, but the father of your children also gets a £500k allowance as well. I presume that he'll be leaving his children at least something from his estate when he dies?
.

"Am I really in the richest 4% of our population?"

There were something like 670,000 deaths in the UK in 2022.

HMRC report that for the tax year 2021/22 that 222,300 estates were reported to them. You only need to report an estate to HMRC if probate is required, not all deaths require probate.

If your estate is worth around £650k then that would put you at something like the 87% percentile of wealth.

So, you're in the top 13% of those people who needed probate when they died.

Of people who had a net estate worth between £600k and £700k around 76% did pay IHT (so it would suggest that around a quarter had a £1 million allowance). Of those that paid tax, the average amount paid was £75,900

Don't forget that people who do not own a home won't be on that list, they are likely to not be as wealthy as you, so that would push you higher up.

Also, people who own a home jointly will not need probate so won't be included either, but there is really not much difference.

@Bumpitybumper i am seriously not going to waste time feeling sorry for people paying 40% tax on unearned windfalls of potentially over a million quid.

The point of my post is we all have to pay in to the system to fund good public services. Because I am a higher rate tax payer I had to also pay 40% tax on a very very modest work bonus, so I am intensely relaxed about people who inherit hundreds of thousands of pounds for doing fuck all, also paying their fair share.

Ah, but my ex has remarried and my understanding is that he plans to leave most of his assets to his wife, he has said that as I have not remarried and
“ have no chance of finding anyone who would want me” our children will get enough from me! He’s really not a nice person and neither is his wife!

I am sorry but I don’t understand your calculations about probate, my brain is not good with maths! I just keep reading about the top 4% wealthy people paying IHT and that appears to be me!

But we still had to get probate when my mum died even though there was no IHT to pay as she was a widow and had my dad’s allowance. We could not sell her house until probate was granted.

Anyway, I might end up in a care home so at least I will be able to pay for a decent one!

I read that 128,000 millionaires are expected to leave the UK this year. Taxing high wealth individuals can be counterproductive as they just leave the UK.

Then tax the assets they leave behind or implement some kind of scheme whereby you have to pay UK tax of some sort wherever you may happen to live if you want to retain your citizenship, a bit like the US already does. It’s not impossible by any means.

And yes OP you are right. Those with second or multiple houses, or other assets, can pass those on nice and early and pay no inheritance tax, but those with only one house can’t exactly do that. Let’s wait and see if Labour penalises the former or the latter. I know which my money is on.

Is this another assumption by the Tory loving press?

I find this something that is often reported but is it actually true? does it happen.

presumably, like everyone else, they have kids at schools and friends and family that they don’t want to leave.

Why do people worry so much about wealth. Rich people remain rich even with more tax taken off them.