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!

some sensationalist buzz phrases here indeed.

My response was to you saying that majority vote for increased taxes and spending. With majority of population being net recipients from the state nobody in sane mind can expect otherwise.

What does this have to do with society functioning and low earners? of course they are important, of course they will vote for large spending. This doesn't meant that this is right approach though.

^ this

It's about to go up massively from next April.... and the current figures are really almost double due to how IHT works - If you're married you only pay IHT on the second death so 5% of estates actually means 10% of people.

Jane passes her money to Tom IHT free. When Tom dies he pays IHT their joint money - 1 bill but it's really 2 people.

Describe how society works without a minority of net contributors?

Is your vision everyone on high wages - how?

Or massive cuts to public services which will change our society to what?

Or is it just magical thinking as usual? This one presumably.

No one ever describes HOW they would change things. Just that they want change.

It is hardly any estates that are taxed. I have no issue with the amount of taxed paid if estates are left to children but I don’t get why the value is so much lower if left to somebody else. People are effectively punished for not having children. So estates pay nothing if they have less than 1 million if they give it to their children but if they have no children it is £325000. Why?

It’s paid from far more estates than suggested. When one half of the couple dies, IHT is deferred until the second half of the couple dies. It isn’t only the wealthiest estates that pay it, no account is made for geographical differences of property prices and it takes no account of how much the recipient(s) get.

I’ve lived in my house for 15 years. If I take into account stamp duty, mortgage interest, maintenance costs and inflation, it’s a loss.

If a child wants to move into the family home with their children, the upfront costs are prohibitive. Tax is payable within six months. If the children can’t afford to pay the full amount as there’s no cash in the estate, they pay interest at 7.75% until the property is sold. If they haven’t sold their house within the six months if they want to buy the family home instead, stamp duty plus an additional 5% upfront stamp duty.

Almost 5% of estates taxed for IHT are worth under £300k. Is that super rich?

20 estates over £10m paid zero IHT.
30 estates between 5 and 10m paid zero IHT.

More likely to be Tom dies first (life expectancy is lower for men) and Jane is left with a huge bill and care needs to pay for on top

Only if you are married. Us single parents can't leave the same amount to our kids as a married couple can.

I’ve lived in my house for 15 years. If I take into account stamp duty, mortgage interest, maintenance costs and inflation, it’s a loss.

You can’t do that though. If you hadn’t bought a house you’d have been paying rent.

Almost 5% of estates taxed for IHT are worth under £300k. Is that super rich?

That simply isn’t true. The threshold is clear. It’s £325k per individual and an extra £175k if a property is left to direct descendants. No estate worth less than £300k has paid IHT.

btw, there is an interesting article on FT which linked this

Share of Britons backing personal tax cuts grows, particularly among Conservative and Reform voters | Ipsos

Look at the graphs, ignore voting intensions. 45% of total in favour of tax cuts even at the cost of public services, 32% in favour of public spending even if it means higher taxes. In Jun 24 it was 40% to 27% in opposite direction.

So your statement is incorrect.

As it is IHT allows a couple to pass on 1million in assets which is a sizable amount, I think that the rhetoric and the way it is portrayed implies that much higher numbers are impacted by IHt than actually is the case.

How many people will get to their 70s as part of a couple though? How many men will have 2nd families by then meaning mothers left with their first batch can't leave more than £325k to their kids?

Thank you for sharing as that is different numbers and I'm interested in opinion polling.

I doubt IHT fits in here as that poll is personal tax cuts and most don't pay IHT.

It's going to be an interesting year for the spend vs cuts debate.

Describe how society works without a minority of net contributors?

I have no idea. Society cannot work without net contributors, but minority cannot fund majority. I do know that current government taxes this contributing minority out of existence.

With Rokos emigrating HMRC lost 330m pa. This deficit is roughly equivalent to the income tax paid by 38,000 average UK workers or the salaries of 4,500 teachers.

The reason for his departure is UK tax regime. Very considerable part of it was IHT.

Smaller fish like 100k+ earners will struggle to emigrate, although many do, but they go on strike retiring early or going part time.

No one ever describes HOW they would change things.
Many posters here and on other threads explained exactly how. Reduce tax to stimulate economy and create more jobs. Reduce welfare drastically, make welfare payments time limited and linked to previous earnings. Tighten PIP criteria and make in person assessments. Invest in social housing building. There are a lot of steps which can and should be taken, tough love is really needed here.

I doubt IHT fits in here as that poll is personal tax cuts and most don't pay IHT.

Sorry, but you're wrong again. This is 7th Oct 2026.

Which of the following comes closest to your view on inheritance tax (IHT)? | Daily Question

36% believe that IHT should be abolished alltogether
16% believe IHT should be reduced
21% think it should be either increased or stay the same.

You are just listing superficial empty claims. Explain how these things will change things. How long will it take for these magic new jobs to appear? What sectors?

We may get to see the living experiment from 2029.

This is assuming people are immensely stupid and simply calling something peach instead of orange will make everyone happy. People are very aware they are saving money to pass onto children. To be fair the level at which the tax is paid should be adjusted between different regions, particularly London where people have to pay half a million to live in a shoe box.

The point about a loss is when people refer to house increases, they don’t take account of the things I mentioned.

The stats I mentioned are from HMRC. I assume those that fall under the threshold but still pay IHT have died too quickly to benefit from things like the 7 year gift rule.

@CeramicRosesregional differences should absolutely be taken into account - for stamp duty too.

Except not everyone gets £1m. Add pensions and lots of people will face losing some of that and paying 60% tax.

Sounds the same but a different name.

Vanishingly few estates pay any inheritance tax at all, esp after people have paid for social care. It’s a non-issue for all but the very wealthiest and luckiest.

I bet you don’t though.

Agree. A lot of people are getting sucked into angry social media bullshit and by the Daily Mail, and are neglecting to focus on the necessary much bigger picture of what we need to safeguard and fund properly from the public purse, to have a functioning stable democracy to live in.

My children's father has just died and, in his will, left them all his worldly wealth split equally. The solicitor dealing with probate will pay any debts first (including IHT) before they receive a single penny. The Government will 100% get their chunk. With 'your proposal' (actually a suggestion as you are not in a position to propose unless - is that you Kemi?), HMRC will have to chase everyone who inherits anything to claw the tax back? Cash, classic cars, art work, etc, all trusted to be valued independently by the inheritors and a little cheque popped in the post? Might cost more than it's worth chasing up those pesky tax dodgers.

You're lucky you have over £1 million to pass on, most haven't