Tories plan to scrap inheritance tax for estates up to £1m is to cost £3.3bn!!!

[PSCMUM]

please tell me, fellow mumsnetters, that you see how awful this would be for public services???! PLease tell me you are less self preservationist than the 2 (pinstriped) aresholes on the tube with me today saying how great it would be as they would get so much more of the value of their parents houses when they died!
I bloody can't stand tories, but this policy is worrying me as it is so appealing as long as you don't consider how they are affording to make such a humungous tax cut - ie, cutting public services. Doctors pay, nurses pay, schools, hospitals, fire engines, lolly pop people, income support, legal aid, free wine for deranged left wingers on mumsnet (ooops, maybe last one just wishful thinking)

[Tinker]

Brings it into persepective doesn't it WW. I mean, it is a capital gain for many.

[Tinker]

And you'd get it all cazzybabs since you're an only child...

[cazzybabs]

Yes - but the inheritence when both parents die would be the money leant to buy our house! I won't be the sole benifery because they want to leave money to the dds and to charity etc. Anyway I guess it all fairly meaningless because it will go on care for them in their old age.

[cushioncover]

So what you're saying is that you wouldn't get any inheritance because they've already given you yours? I'm still a little confused as to why you'd need to sell your house to pay the IHT.

[Zog]

Why on earth shouldn't people decide what happens to their money? All I'm trying to say is that when IHT was introduced, it was aimed at very high value estates. Now it's catching people like my ILs. TBH, I think I'll advise them to sell the house, give the money away to whichever deserving causes grab their attention, then apply for a council house. When this Govt stops being so wasteful with public money (Tax Credits administration anyone?), then maybe I'll agree that they know better than you and I what our money should be spent on.

Anyway, am disheartened by the insults flying on this thread, so will take my leave. Kewcumber summed things up well for me earlier:

"Don't like this kind of argument though. That anyone who disagrees must be a stupid greedy person who buys too many shoes like ZOG BIL. Time for me to leave (again) I think."

[80sMum]

It certainly doesn't seem right that a person should be forced to sell their home when they inherit it. This is what happens to siblings that cohabit, an adult child that lives with an elderly parent or couples that don't marry. When one dies and the other inherits the home that they live in, they may be forced to sell it to pay the IHT. If the estate is worth, say £450k (a modest amount these days) the survivor would have to find £60k from somewhere to pay the IHT. Often, their only asset is the house (their home) which must be sold to pay the debt. Perhaps IHT should not apply in these cases, i.e. you shouldn't be forced to sell the home that you live in to pay the tax due.

[Anteater]

Agree with FCE.
Was going to ramble on about paying more in tax every year (corporation,VAT and private)than most households earn, but its late, the ramble has no conclusion in the UK and dw will not move abroad!
TAX TAX TAX arrrghhh!

[WendyWeber]

"If the estate is worth, say £450k (a modest amount these days)"

80smum, sorry to harp on about this but £450K is only a "modest amount" in a very few parts of the country (mostly, though admittedly not all, in the SE) - the average house price in the UK is still only about £210K, and most people even with property worth that will not have an estate worth anywhere near £450K, or even £350K - hence no inheritance tax for most.

[Tortington]

i live in the south east

its not a modest amount - its a shitload of money.

[spookthief]

It's all a bit meaningless since this is money you absolutely can't count on. You can't possibly enter into any sort of financial planning expecting an inheritence since what if - oh horrors! - your parents just happen to be very long lived or sadly, need residential care in which case whatever sort of money they have will be gone in a wink.

Maybe, if we can truly expect up to 40% of estates to be affected by IHT in the future, this will actually act as a correction on the housing market and all these silly-price houses will suddenly be worth a lot less and therefore the tax won't be payable after all.

[80sMum]

Well, yes I guess it depends where you live. Being deep inside the Surrey/Hampshire commuter belt does tend to skew one's view a bit of what constitutes 'modest'. In the area where I live a £450k house would be very ordinary, something like this for example. It's very nice, but hardly a 'rich' person's mansion.

[Tortington]

well once inherited and tax paid you can move and buy something mortgage free

[WendyWeber]

Round here it would buy you this

You see?

[Caroline1852]

I have only read very few of the posts. Apologies if I am repeating.
Inheritance tax is in many respects a voluntary tax in that the truly wealthy take action that perfectly legally substantially mitigates or erases all liability. Mr & Mrs Jones have worked hard and saved hard all their lives and have done well through their property in inner London. When they pass on the government gets handed 40%. In spite of the fact that their 3 children are as yet unable to get on the property ladder (one is a nurse, one a teacher and one a teacher, all in inner London). Meanwhile, Lord and Lady Fuckwit's 3 children have inherited their parents' estate in full. They are very clever those inheritance tax advisers at daddy's bank.

[WendyWeber]

40% of the value over £350K, caroline

[WendyWeber]

(so a £500K property requires tax of £60K)

[WendyWeber]

And Mr & Mrs Jones have mostly done well through property price inflation. They probably paid £10K for their house in 1970.

[80sMum]

My point is that if someone lives here and the person they with with (non-spouse) dies and they inherit the home they've been living in and have no other assets, they'd have to sell their home to pay IHT. But if they lived here instead they could remain in their home. Doesn't seem fair that someone should have to give up their home just because of silly house prices in their area.
Can you see the point I'm making? I'm not against inheritance tax per se.

[WendyWeber]

Who is the non-spouse they live with though?

[80sMum]

Their brother or sister; their elderly parent, their long-term partner; their lifelong friend. Any of those. The people that tend to get 'clobbered' most often though are the adult children of an elderly parent. The 'child' is probably a pensioner themself by the time the parent dies so is on a fixed income. The house was bought decades before on a modest income. Parent dies, leaves little savings but house now worth a packet due to rising prices. Elderly 'child' doesn't have £60k to pay IHT so has to sell their home and has all the trauma of moving as well as coping with their bereavement. Doesn't seem right.

[Caroline1852]

WendyWeber, I am quite aware how it works. If you are not married, there is no spousal exemption. So let's say for example that I live in a house with my partner and our children. House is worth £800,000 for example. I get knocked off my bike and die. Partner has to give up work to look after children (our youngest is only 10 weeks old). Sadly my estate, my half of the house plus some shares a couple of pensions funds and ISAs and PEPs and my car take me over the £300,000 limit, well over. In spite of me leaving all my wordly goods to partner, unfortunately the government want their 40% of the excess over them IHT limit. Partner gets billed for £100,000 and has no way of paying it because he has given up work to look after the children and there is no money coming in. He has no way of raising that kind of money other than selling the house uprooting my 4 bereaved children in the process. Oh and they will want their stamp duty on the cheaper house he purchases too.

[Upwind]

Still not had time to read much of the thread but surely this is the easiest tax in the world to avoid?

Caroline1852, if you are concerned about your partner paying inheritance tax on your demise, marry them! I fail to understand why those who insist it is just a "piece of paper" seem the most reluctant to marry. If that is all it is to you and you want the benefits of married people just get married legally and keep calling each other "DP". Nothing to stop you having that dream ceremony a few years down the line if that is what you are waiting for.

If you are a parent worried about your children paying IHT, spend the money on them while you are alive. You will also get to enjoy watching them benefit from it.

I do agree that there is an argument for IHT being deferred where there is a surviving relative living in the same house. But that is not justification for raising this tax on income that is largely unearned and due to hyperinflation of house prices.

Why is there such sympathy for those who must pay inheritance tax on the ordinary family homes they inherit and bugger all sympathy for thwarted first time buyers who cannot afford to live in such homes? We are and will be forced to rent privately with a young family. In the UK private tenants have little security and yet the Daily Mail is more worried about the unfortunate recipients of large inheritances [hmmm]

[Zog]

Aah, moth to a flame!

I have loads of sympathy for first time buyers - chances are that an inheritance may be the only way that a lot of our children manage to buy a property. That will certainly be the case for my kids if they want to buy round here (not Mayfair, not inner London, somewhere pretty ordinary that happens to have grammar schools).

[WaynettaVonBlood]

There appear to be lots of bitter people on this thread..............

[ebenezer]

Totally agree Zog. It's the only way my kids will ever stand a chance of owning a home too.
What really pisses me off about IT is that it's yet another way of the govt takng away choice. Someone said earlier that you could have two people who work equally hard and earn the same amount over their life time but end up in quite different situations. Mr A enjoys spending his money on himself, he also helps his kids to buy their own homes by gifting regular sums of money to them and he treats his grandchildren to holidays. He doesn't own his home because he chooses to spend his money on other things.
Mr B has a frugal lifestyle - he worked hard to pay his mortgage, so now owns his own home, but had to make many sacrifices (eg no holidays) to get there. His adult children have struggled too - maybe they're still renting houses - but Mr B has always known that one day they'll be able to benefit from inheriting what he's worked hard to buy.
How is fair for the govt to tax what Mr B is leaving as gifts to his flesh and blood? Whether it's tax over £350 K is not the point - the fact is that any money inherited will be hugely taxed anyway once it's spent -so what is the justification for the govt creaming off a shed load in the first place?
And as someone pointed out earlier - it's easy to talk about 'the government's money' as if it's something that they've earned. Just remember who earned this money in the first place.