Abolish IHT entirely but replace it with gift tax

[Laptopfangirl]

Inheritance Tax in the news again today after the Tories pledge to exempt family homes..

It's always such an unpopular tax, and I get why - it does seem unfair to pay a tax on your assets when you die (even though, I know, most estates don't pay anything).

Of course the opposite argument is that it's unfair for the recipients of estates to get rich off the backs of their parents.

So I wonder if it would be unreasonable to abolish IHT and tax gift receipts instead. So instead of the estate paying tax if it's worth a certain level, the dead person can leave it all tax-free, and tax is only paid by recipient's if they receive a gift above a certain level of value.

That way the dead person pays no tax (which seems fairer) and also the lucky gift recipient does pay tax (which also seems fairer). If you set the tax level at the same marginal rate as income tax then if you split your estate so that nobody got more than £12,750, nobody would pay tax at all on their gifts. This might encourage proper redistribution of wealth.

Am I being silly? I'm sure there are many reasons why this wouldn't work, but I'd like to hear what they are so that I can stop thinking that this is a good idea!

Tax on all gifts or only gifts from dead people?

None of it should be taxed. I got taxed on my earnings and opted not to spend that money. Why should it be taxed to pay for services for all and sundry?

I'm honestly just bloody sick of responsible people trying to do the right thing and the feckless just getting support/free and subsidised stuff left right and centre.

I was only thinking of inheritances for the purposes of this conversation. Although I guess there'd need to be some kind of safeguards against people avoiding the tax by giving gifts whilst living (maybe like the 7 year rule now)

Only 5% of estates pay any inheritance tax.

This is a very niche concern for the very wealthiest.

A tax on gifting would only encourage people to keep their money. We want it moving around the economy please.

There's a huge majority between the 5% of estates that pay any inheritance tax and the small % you refer to in offensive terms.

The majority of taxes go to: pensions, NHS, schools, roads, courts, police etc etc etc.

If you don't believe in 'free and subsidised' police, you don't believe in a civilised modern democratic nation.

Absofuckinglutely!

But the point is you won't be taxed on it. The recipients of your gifts will be, and they didn't work for it all.

Also tbf the majority of iht that will be paid is on the value of houses rather than someones savings and most of that is unearned profit just from house prices going up.

When you save you have paid tax on what you earned and then tax on what you leave as inheritance plus tac on any interest you earned on the savings. That is unfair. At least iht should be tiered. What is really unfair is thinking Londoners have it easy. Move from London tothe North and you could buy a three bed house with what you woukd pay for a one bed flat in London and still have change. Adult Children often want to live near their families, in that respect many Lndon families suffer.

the wealthiest easily avoid IHT. It’s a middle class tax. Get rid of all exemptions, drop the rate to 10% and you’ll take much more tax.

It is as much a tax on sudden unexpected death as it is a tax on the wealthy.

Many people caught by IHT do so because they died before they could carry out their planned expenditure. Save up to buy your child a house, get hit by a bus while
relatively young and in good health with a long life expectancy and your estate ends up with an IHT bill.

Most people can plan to avoid IHT but to do that they need to live an expected natural lifespan.

If the wealthiest easily avoid it, and only 5% of estates are large enough to possibly pay it, then hardly anyone is paying it.

Yes, but that doesn't change the fact it is a very small percentage of estates that ever would pay it.

95% of households pay none. It's a niche concern of the wealthiest.

The wages that pay for houses has also gone up. That income was taxed. And houses don’t just sit, they cost money to maintain and insure, which is taxed, and they are taxed every year. House prices have not shot up everywhere. In some places they are now worth less, not just in real terms, than 15 years ago.

I’d much rather pay a big lump of tax when I’m dead than when I’m alive.

Interesting Dan Neidle thread showing exactly who pays IHT currently. https://x.com/DanNeidle/status/2107901300054675923?s=20

Most people will not pay this tax. It’s only for the richest 4% and they will be able to not be taxed on the first amount - think one million. Classic Tory bs. This money pays for the services that the whole of society benefits from, schools, nhs etc. so basically what the tories want to do is for the richest to pay nothing and the poorest to pay for everything.

I don’t understand what the difference between inheritance tax and ‘gift’ tax would be? The tax would still come out of the money that’s been left or gifted

Again, these are niche concerns of the very wealthiest, as 95% of estates pay no IHT. It's not really about houses but rather wealth.

@Laptopfangirl I’m not sure you understand IHT. It is levied on the estate and effectively paid by the beneficiariesz. I don’t understand how that is any different to your “gift tax”.

how about not taxing it in the first place? It’s a tax on doing the right thing.

The top 5% already pay 50% of all income tax.

To suggest the richest pay for nothing and the poorest pay for everything is absurd. The bottom 50% pay less than 10% between them.

Yes. You're being silly. The estate has already been taxed throughout the persons life. And the idea that a beneficiary is somehow getting money they aren't paying tax on is ridiculous. An inheritance is no different to a lottery win. And we dont tax those. A child inherritance is worth 400k and they have to pay tax. Someone wins 100 million in the lottery and they dont.

We pay tax on allsorts of things that we do or buy with our income that was already taxed. Why is this particular tax so offensive?

Lottery winners didnt work for it.