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)

"We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle"
-Winston Churchill

So true it is.

on the other hand WW the swanky new system enabled me to instantly know in the GP's office that I couldn't get an appointment to see a rheumatologist for xx weeks rather than waiting for a letter to arrive a week or so later. That was £6bn well spent - I thought.

cost of ID cards currently running at £5bn news.bbc.co.uk/1/hi/uk_politics/6642339.stm

ID cards - now there's a waste of money, IMHO

Kewcumber - I disagree with lots of the government's spending plans but I am also pro redistributive taxation, especially IHT.

the nhs it system is an utter farce. they could have built local integrated systems for a fraction of the cost (like millions instead of billions). they need to seriously look at the way they contract IT I think. ID cards are not worth the cash and the governemnt wastes horrendous amounts on consultants.

But the thing is, that when there are cuts to be made, neither the tories nor labour cut in the right places. they can't get back the money they spent on Iraq or the nhs IT thing - the things are not directly comparable.

But surely these days most people are well into middle age before they inherit? My Uncle is 63 and my Dad is 59 and neither of them have inherited anything substantial (but they both own their homes outright ). I am 34 (so no longer that young) and have had a mortgage for 10 years.

My Mum was in her mid-50s when she inherited my grandparent's house (not much else left because most of their savings had gone on nursing care by this point). Mum and Dad had already paid their mortgage off by then. So it hasn't helped them get on the housing ladder - just seems to be funding a lifestyle of lots of meals out and foreign holidays.

Agree Bozza. Most people who are struggling to pay their mortgage are at the beginning of the term of it. 25 year mortgages are given with teh expectation that you will at least live for 25 years after starting it. If you're unfortunate to die beforehand, you have usually got life insurance to cover it. Your spouse can then often live mortgage-free until they die.

Lost the thread of what I'm trying to say but a) most people haven't struggled with payments ALL of their lives and b) most ftbuyers are not expecting both parents to die imminently, I would suggest.

For most people, any inheritance is a windfall for doing nothing.

So what about all those thirty somethings who rent because they can't afford to get on the housing ladder. Whe their parents die, they should give it to the government so they can redistribute it to people whom they determine more needy?

I think there will be a lot of people approaching middle age in about ten years who still can't afford home. I suggest the government adress this issue before we are set to retire. These people need to buy houses and it in the country's best interest that they are able to do so. Otherwise we are going to be hit by a generation of pensioners who don't own homes to live in when we are set to retire. And where is the government going to house us then?!?!?

I definitely think that the threshold should be raised. There are too many people who are unfairly disadvantaged. It is not taxing the group that it was designed to tax, i.e. the rich. Plenty of working class people in the SE are being caught at the moment. It is avoided by those who can afford to pay by the establishment of trusts etc. People are also assuming that all the money inherited comes from property. I am sure that most of it does but there are some who have saved over their lives and who have already paid tax on that money. Not a great incentitive to work hard and save is it, if nearly half of what you save is going to be taken away by the government.

£3.3bn isn't a huge amount of money in the scheme of government budgets and I am sure that nobody would begrudge paying an extra 1p on income tax to pay for the services that we all want. It is after all a progressive tax, easily administered through the PAYE system and you don't pay if you don't earn.

But I have heard so many people round where I live bemoan, "Oh, my poor children can't get on the housing ladder" when they, the parents, are rattling around in large houses. They can't see that they reaped the benefit of low house prices and then great house price inflation, and that this then rebounds on those who come after.

'Mum and Dad had already paid their mortgage off by then. So it hasn't helped them get on the housing ladder - just seems to be funding a lifestyle of lots of meals out and foreign holidays'

This sounds lovely and I'm really pleased when I hear stories like this about people who've worked hard and brought up families. Why shouldn't they have some fun with the money?

But eleusis it is not the 30 somethings that are inheriting, it is their parents. And anyway surely, even in London £100k (assuming 3 children take an even split), would be enough for a decent deposit?

Eliza it is probably because they are also content to live in one of those type of terraced houses mentioned earlier, and both are still working so not all that many foreign holidays really.

Gawd Neicie, I think it's pretty well established that many people would begrudge paying a penny more on income tax to fund services. So much so that the only party advocating it seem to have dropped it from their plans. Along with the other "you don't pay if you don't earn" idea of local income tax.

Threshold should be flexed according to postcode.

Playing devils advocate a bit, TellusMater.

Why?

You can sell the house and take the money anywhere. Inheritance is not tied to one location. SO why should the tax?

I'm not playing Devil's advocate at all. I'm saying that one party proposed doing that, and it proved electorally unpopular. SO they have ditched it. What people say and how they vote on this issue are different.

Mmmmm....Govt plans to spend millions/billions? on illegal war.

Wouldn't be Labour, would it?

Personally I'm delighted that we might make a bit of money when our hard working/hard-saving parents die - and hopefully our children will benefit from our careful lifestyle too.

I'd rather that than funding an illegal war

I think many people will be swayed by the promise of a tax-cut. It doesn't mean they're greedy, it just means that people very often have to stretch to make ends meet, and they appreciate any help they can get in that regard.

There was a kerfuffle a few weeks ago about 'conviction politicians'. Well, tbh, I don't think there are that many conviction voters. I think most of us are fairly self-centred when it comes to voting. Having said that, only one issue really gets me exercised, and it's not tax. But then, I haven't paid any for a long time, it's my dh that does all that.

There are so many conflicting issues here that it is difficult to know where to start but here goes:

We all pay multiple taxes on our income. I pay income tax and NI. Out of that taxed income I pay council tax and road tax and various other direct taxes. I then pay VAT on goods bought with what is left of my taxed income. I then have savings, and any interest or capital gain or income from these is also taxed. If I wanted to give a large gift to a member of my family this would be taxable too, regardless of how much tax had always been paid on this sum. That is how the tax system in this country works and it seems to me a bit silly to complain that IHT is a repeat tax - practically everything is a repeat tax!

On the other hand, whilst I am in favour of a redistributive taxation system it probably is fair to point out that the majority of people who have an IHT liability on their estate have probably paid a pretty fair whack already, and in the grand scheme of things that amount owing in IHT is negligible compared to their contribution over a lifetime. (Trying to put this in perspective we pay direct household taxes of over £40K per annum leaving aside VAT etc - we have a joint nil rate band allowance of £600K, rising to £700K over the next few years. Even if we left an estate worth a million quid (which is pretty unlikely as I do plan to spend my savings before I die) the IHT liability would be £120K, which is less than we've paid in income tax over the last 3 years, and is certainly a drop in the ocean compared to what we will have paid throughout our lives.)

So perhaps the reason people get so upset about this is that it does add stress to an already fraught situation when a loved one dies, and therefore this is more an emotional issue than a practical one?

SP - I am not trying to argue that we could reclaim the wasted money spent of rubbish projects I was using it to illutrate the point that people who are anti-taxes are often so becuase a lack of trust that the govt will spend the extra money wisely.

As several people have said IHT will hit up to 40% of estates in future and the govt will have a massive windfall. Wouldn't it be lovely to think they will spend it all on getting low income families out of the poverty trap or on health or education.

The past tends to be a great predictor of the future and governments of all shades of blue, red and yellow have their terms of office littered with such money pits.

I tried to stay away from this thread as, for some reason (given its not a subject likely to be relevant to me) the rather snide, sneery jibes at "greedy bastards". My mum and dad did scrimp and save to pay for their first (and subsequent houses) when they were young, when contemporaries of their were living in council houses and having a much better lifestyle. She would love to leave the money she worked extremely hard for all her life to me and my siblings without being taxed on it again. I find the description of her as a greedy bastard somewhat offensive.

I wouldn't object to a small increase in IHT relief in line with inflation. The £1m is merely a desperate attempt at vote catching. Some of the reasons that only 6% of estates are liable to IHT anyway are that there is no IHT on inter-spouse inheritance up to a pretty high limit and that so many people have to pay tens/hundreds of thousands of their savings in nursing home fees at the ends of their lives, so their estates are below IHT limits on their deaths.
As most people with any money are living into their 80s now, their children do not inherit until they are in their 50s - just about the time they can help setting up their children in their first homes - which is what I hope to be able to do (plus a little spare to make up for the pensions mess of my generation compared with my parents'.

Kew, I have to agree. My PIL have been tremendously frugal all their lives, and have been carers for an elderly parent for a long time, too. They lived with parents while they saved up for a house, and their motivation was so that they would be able to help their children do better in life than they did, the same as all of us.

"But I have heard so many people round where I live bemoan, "Oh, my poor children can't get on the housing ladder" when they, the parents, are rattling around in large houses. They can't see that they reaped the benefit of low house prices and then great house price inflation, and that this then rebounds on those who come after."

but does it - surely that huge house will then be left to the children/grandchildren/whoever who currently can't get on the housing ladder - and may never be able to do so, once the house is left to them they will then have the means to do so.

Just because you live in a big house that's worth a lot of money doesn't mean you've got a lot of money to help your children out now...