Inheritance Tax

[Annabella92]

Is it wrong to try and avoid inheritance tax? Is inheritance tax itself unfair? Has your family taken any measures to avoid it?

I am aware

Well, you can't pay it if you're dead.

So actually no-one is paying it.

Ok.

But they're dead.

They can't care

Yes, Daily Fail article tomorrow: Mumsnet Vipers are Tax Dodging Bastards.

It might be called inheritance tax, but in the UK it's the estate, i.e. the dead person, that pays it. The tax varies depending on the size of the estate, not on how much each individual recipient gets ( apart from the 100% relief for spouses).
Some countries tax the recipient, so in those countries if you leave a million quid to one person they'll go over their tax free amount and pay IHT, but if you leave it to dozens of different people who've never had an inheritance before, they'll stay under their personal threshold and no one pays any tax.

IHT is grave robbing in my book. Do whatever you can to minimise the bill.

Should we just disregard all wills then and allow people to do whatever they want with dead bodies? After all they're dead so they 'can't care'.

Not every jurisdiction levies inheritance tax or capital gains tax. It is not a given.

UK sucks.

This is true. But other countries have taxes we don’t. For example many countries will levy tax on any gain you make when you sell your home.

In other words boosting the economy, excellent idea much more helpful than passing on generational wealth which exacerbates inequality

What you just described is capital gains tax. UK has it too.

With a PPR exemption, which is a big deal when you consider the scale of house price increases over the past few decades. Plenty of other countries don’t have the PPR exemption.

It is a fallacy that inheritance tax will close the gap between those who inherit and those who don't. Unless a person is close the death right now, inheritance tax can be planned around and is eminently avoidable.

What this current government has done is accelerate the Great Wealth Transfer from boomers and Gen X to their children and grandchildren. These pension-rich and wealthy pensioners will pass their wealth using all tax allowances and outside earlier than they planned in order to give sufficient allowance for surviving with 7 years to spare. So whilst your 20/30 something dc would usually not see their contemporaries getting big gifts from their parents at their age, more and more of this age group will in fact see their peers receiving large sums from retiring parents who will now spend their pensions instead and downsize their properties and give away other assets early.

Retirement planning has been turned on its head. It is the dcs that benefit sooner rather than later. The inheritocracy prevails and the wealth gap will widen.

Not if you happen to be a divorced homeowner who has the misfortune of an early death after the second half of 2027. Their defined contribution pension will be added to the estate for IHT purposes.

Nor is it worth holding onto a sum just in case you need to pay for residential care. If prudence and financial sacrifice is to be taxed at 64% you might want to blow the lot.

I cannot speak for plenty other countries but the country I am from (Asia) does not levy any IHT or Capital Gains tax on any asset whatsoever. This encourages wealth creation because you keep what you save/accumulate, rather than relying on benefits.

Do that then.

I would be described as right-wing but follow an ex-trader on insta who talks about IHT being a protection for the middle and working class against the elite getting too rich and powerful. I really like him and support his thinking.

I work for UK based billionaires whose estates will be absolutely whalloped for IHT when they cark it.

i also with for non-uk residents whose estates won’t be touched because they got the hell out of here back in 2014.

Do what you can for your children/grandchildren. Up to you if you want the government to decide how your wealth is spent or not.

IHT is only necessary because people do not pay enough tax while still alive. If they payed more tax while still alive IHT could be abolished. You could regard it as deferred tax.

As IHT is only payed on about 4% of deaths (before the changes) then it clearly only affects the wealthy. This makes IHT fit in with the rest of the UK's progressive tax system.

@Rollercoaster1920
Say a property worth 700k in the SE. Mortgage free after a lifetime of working. A DC pension pot of £425k is required to get approx. £30k for 20 years (after that state pension).

The property in the SE now worth 700k could have been worth around 155k in 1997. With a 25yr mortgage ending in 2022 it will have cost a total of around £245k of your after tax income, so 455k is unearned income and untaxed.

A pension pot of 425k as you near retirement could be made of 125k of contributions from you (which were untaxed), 50k from your employer and the rest from investment gains.

So very little of your 1125k estate comes from your earned income, and even less from your taxed income.

😂😂😂

Not different at all. Besides income tax is paid more than once too e.g. you pay income tax and then pay a cleaner to clean your house and they also have to pay income tax on the money you paid them that you’ve already paid tax on. Almost all money is taxed everytime it changes hands. Inheritance tax is no different.

People are taxed twice on lots of things. People use earned income which has been taxed to pay for goods and services which attract VAT.

If you receive an inheritance, you haven't paid any tax on it. The estate is taxed before you receive it. The huge rise in house prices means a huge increase in the value of some homes and this is unearned income which hasn't previously been taxed.

Yes.
No.
Not being millionaires.
Happy to help clear that one up. 🙄

My husband is not a resident, and we do not have the married couple allowance.
That means: my family truly gets screwed when I die...

You are arranging your finances so that you get free elderly care too. You could afford to pay care fees but are arranging your finances so that the state, i.e. the tax payer, pays for your care. Why is that OK?

You are in no position to look down on other people who are eligible for free elderly care.