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!

As to 1mn - only 51% of UK population married, so almost half of population only has 500k threshold. In London this mean that even crappy 1-2bed flat is likely to attract some IHT

But the tax will still come out of the amount that is gifted so it’s pointless to just call it something else

Everyone banging on about IHT being paid by only wealthiest 4% or 5% of estates - do you not understand that this is going to massively change once pension pots are included? I think many many of you are in for a shock.

UK has the 2nd highest IHT rate in the entire world.

Many developed countries, incl much loved here Scandi, abolished IHT many years ago and do just fine

Yes but that's clearly not affecting many estates, only a low percentage pay inheritance tax. As people including me keep pointing out.

I really don't believe this 5% figure. Both myself and my husband will pay this due to large pensions. We will not be leaving anything to each other as we have children from previous marriages. I have many friends who are in a similar or better position.

Other taxes there are much higher.

This proposal from Badenoch/Conservatives is not to transfer to other taxation, but to make massive cuts to state spending.

Not believing published and audited government data = conspiracy theory.

Someone up thread said the expectation is 10%?

which is well overdue

You know the way that people who send their kids to private school think that LOADS of people send their kids private, even though it's only 6%...?

Why does everyone say "I earned it and paid tax, why should I pay again?"
You are NOT paying, it's your beneficiaries.

The change I'd make, as someone trying to sort out my mother's estate, is to allow you to sell things to pay the IHT instead of having to pay it up front.

I have no objection to paying tax on what is basically a massive windfall for us. It will go towards my DCs education, my and DH and DS healthcare, both DH and DS have serious health conditions and if they lived in another country we'd be bankrupt paying for treatment.

Undoubtedly that's what a minority of voters think. But polling shows the number wanting tax cuts is lower - about half? - than the number who wants increased public spending. And then there's a big chunk who want things left about the same.

I understand that pensions are being brought into estates. And therefore large pension pots (or pension + house) means more estates will reach the threshold. But are you and your DH not planning to draw down and live off your pensions? So that there would only be a big chunk left in the (unfortunate) case that you
die at a younger age?

Pensions are meant to be vehicles for funding retirement, not passing wealth down generations.

Pensions were being used to avoid inheritance tax I guess.

Someone up thread said even with the changes only 10% will be affected.

Same! The whole system is a joke!

YABU. No thank you.

We are but are withdrawing a lesser % then the funds are increasing by. My pension pot is now worth more than it was in 2017 and I have been drawing for about 7/8 years.

As in my example I gave. My estate will be taxed at 40% after allowances so yes I am being taxed even although I am dead. The pension fund money then has to be taxed at the person's tax rate do eg in my son's case some of it at 40% and in my nephews's cases less when they withdraw.

Of course, with quarter of working age adults being economically inactive, with top 10% of earners paying over 60% of tax, of course most of people will want more public spending than tax cuts. Majority of population are net takers.

As always, they will run out of other peoples money at some stage.

4.72%

https://www.gov.uk/government/statistics/inheritance-tax-liabilities-statistics/inheritance-tax-liabilities-statistics-commentary

I suspect there's many trusts and other tax aversions used. In fact I know there is.

some sensationalist buzz phrases here.

Within the roughly one in five not working, large numbers of students, carers, SAHPs, early retirees, people living off investments.

Low earners such as care assistants are contributing in other ways by making it possible for others to work and contribute.

Society can't function without large numbers of lower paid workers.

Some people know the price of everything and the value of nothing.

I don’t understand the practical difference between IHT and “gift tax”. I can’t get wound up about it - tax income has to come from somewhere so why not deceased estates? I’d rather owe money when I’m dead than when I’m living. What I don’t like is the way property, or, sentimentally, “the family home” is treated differently from other assets. Doddery old ladies shouldn’t be encouraged to live in dilapidated mansions with no downstairs loo and stone steps up to the front door because it’s a tax free asset whereas if they sold it and rented a nice warm flat built by McCarthy and Stone then the profit from the sale would be taxed at 40%. Like a pp I would be happy for all estates to be dragged in at a 8-10% rate with no special exemption for property and the tax payable on the death of the surviving spouse if appropriate.

My mother’s estate may be liable - care costs dependent - and she hasn’t worked hard her whole life at all. She worked full time for about 5 years and 15 hours a week for about 20 years. The people who definitely haven’t worked hard for it are my siblings and I who could potentially inherit £300k each for literally no work at all.

I agree that family homes should be safe. I really am surprising myself by agreeing with Kemi on this one. It makes no sense to send families into debt and mortgages because you take money from something already taxed multiple times that is a basic human need = shelter.

Really if she said she would make a deal with the countries holding offshore accounts and find a way to tax crapto I think it would swing it for me. Doesn't sound very Tory though, solving a problem taxing the people with the most.

Not sure how she is coming to a spend of 10bn on air defence with this policy either.