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!

It looks like tories finally found the magic money tree Theresa May was talking about! Abolishing IHT, keeping the triple lock, spending billions on the dome, where's the money coming from for all these promises

Love this idea, so much scope. They reckon it costs about 250000 to bring up a child to 18, why not just tax that as well. After all that's a lot of 'benefit in kind' children are getting, not to mention all those birthday and xmas presents. Talk about widening the tax base we could squeeze 10s of thousands out of families for every child, what a win

you are free to pay 40% on it, HMRC will always take extra payments.

If IHT is scrapped, they do need to charge CGT on capital gain as it would be charged in life. So, a primary residence has no CGT, but any second residence does.

ATM CGT is set to zero from death, even if there’s been a huge gain.

As I said previously, I want to change the rules of the game, not play a different game to everyone else.

Surely the rules around that are a bit outdated?

Obviously not every single gift should be taxed. I am talking about large lump sums like inheritances.

It is easy to point out unlikely scenarios like you have done, or scoff without engaging in the substantive argument. It adds nothing to the debate.

Tell me how you earned your inheritance and I’ll listen?

It is free money, you didn’t do anything at all to earn your parents’ money, you literally just won the birth lottery.

FREE MONEY 👍

Genuinely, what is the difference? Both are redistribution of assets within families, you are fine with one but not with the other? Gifted income is never earned whether it is gifted by parents, siblings, friends or anyone else. Why do you think the default should be that the government dips its hand into every transaction between private individuals?

The difference is that the tax is paid by the living recipient who has never paid tax on the money, rather than by the estate of the dead person who has. In many cases the practical impact will be nil, but in many other cases it will be substantial, and crucially it will remove a key attack line used against IHT.

You assume that all inheritance are redistribution of wealth within families. In many cases this is true, but my proposal would incentivise wider distribution, which would be fairer for society (whilst making no difference to the outcome if parents still wanted to leave things to their kids). Passing wealth down the generations is obviously something that parents want to do. But it is also obviously unfair on those without rich parents. My proposal seeks to gently nudge towards addressing that.

I think it is right that large gifts are taxed. If you don't on principle then of course you wouldn't like a gift tax but I struggle to see how it isn't an improvement on IHT regardless.

Did you grow up in poverty without rich parents? .

Do you mean gift it to a load of poorer people then come on Mumsnet to tell everyone how virtuous you are

No I grew up in a great middle class home. Dad was a printer, mum a youth worker after my sister and I were in school. Lived in a house they bought for £28,000 in 1978 that is now worth £400,000.

I find IHT so mean. You provide for your family in life, why can't that carry on in death? It's the last thing you can do for them. You earned the money or bought the house and paid tax on it while alive, it's not on that it's taxed again.
Having just done probate for a parent (with no tax to pay btw), I'd rather have dad back than any £ anyway but I'd really have begrudged giving the government yet more money. Every time I turn around I'm taxed atm.

I’m sorry for your loss. It is mean, especially when you’ve seen some of the sacrifices they’ve made.

iht is effectively paid by beneficiaries now , person dies, estate is calculated, tax is paid , what’s left is distributed to beneficiaries,

Yes @joles12.

One thing I have done is I have a life insurance policy payable on death which will go some way to offset the IHT. Took it out years ago.

That explains the passion for optics over substance. Just keep championing more money for a system that isn’t fit for purpose and is full of waste, without tackling the structural problems. As long as there’s a worthy slogan about the “greater good”, what does it matter if a material percentage of every pound raised is wasted or used inefficiently, as long as the headline receipts figure looks good? And if it doesn’t achieve what it’s supposed to, you can always blame the Conservatives or roll out a bit of faux-empathy PR.

I suppose that’s in line with Labour’s usual approach.

The Treasury Committee of MPs (cross party and we know AB want more of those collabs) concluded student loans were effectively mis-sold. The government’s response, to paraphrase: “We’re sorry we weren’t clear that we could change the terms of your student loans in a way that’s disproportionately punitive. We’ve listened and improved things... From now on we’ll be more transparent about the fact that we can do that.”

Or my current favourite which is effectively: “We’ve heard that fuel prices are hurting people. We’ve listened, we understand and we want to help, so now you can go online and find the cheapest petrol in your area. We will always do what we can to help.” We won't mention that apps that did that existed already or the windfall they are getting from from VAT on fuel. Fuel duty is a fixed amount per litre, but VAT is a %, so every rise at the pump means more for the Treasury. You might be surprised at how much people estimate the Iran war has raised for them.

“Wider distribution, which would be fairer…” Fairer like VAT on private schools? It raised more than they expected, so how are state schools doing after that massive injection? Wait, what? Fewer teaching hours available, you say? To be fair they never said it would all be ringfenced for schools, so there is that.

Labour must love you. Full of good ideas for spending other people’s money, but not prepared to lead by example or make sure it will deliver maximum value.

Many people "earn" their inheritance for working in their family business for decades, often with little or no remuneration, but on the promise of "one day, my son, all this will be yours" especially with farms.

Nail on the head, especially with how Labour are gas lighting people into thinking they're helping when they're doing bugger all and making things worse.

Especially your comments re fuel and their answer being an app rather than reducing VAT or fuel duty. That's just typical Labour smoke and mirrors.

No mention of the FACT that they caused some of our current inflation and unemployment increase by their mindless NIC hike!

And Burnham sounding all sincere and making it sound like he's helping people when he's done absolutely nothing of any substance in the last few months.

Thanks. Honestly, you couldn’t make it up, could you

Getting people into work, getting businesses to invest in the UK, growing the economy, and tax revenue will increase alongside benefit payments reducing.

Reducing IHT will bring in MORE money to the Treasury because people won't feel it's worth setting up tax planning schemes, trusts, etc to avoid it.

It's unfair? wtf. That money was earned and taxed. Now it should be up to the person who earned it and paid that tax who it goes to. IHT is theft.

But that’s the point, a lot of it has never been taxed. The already taxed argument is nonsense.