Inheritance Tax

[Luckydip1]

Rushi Sunak has floated the idea of abolishing IHT, at last, this has got to be the most hated tax in Britain. Why tax people on what they have already been taxed on. Now I can pass my house onto my children without it having to be sold to pay IHT.

I'd go the other way around and make inheritance tax 100% - it would make the UK a lot fairer and put people on a more equal financial footing.

She can always make her DD joint tenant or tenant in common now. Or the DD can get a small mortgage to pay the IHT. After all, who thinks paying £40K in mortgage for a £500k house?

Anyone can leave their estate in a trust. You do it if you're jealous!

It's not jealous to want the rich to pay their share. Trusts aren't cheap so not suitable for most.

There are a few very wealthy people who will benefit from this, but more likely they have been able to plan for inheritance tax in a way the less wealthy cannot eg gifts during their lifetime and family trusts.

in reality is is a tax levied on home owners (who have managed to dodge care homes fees) in London and the south east.

Have a look at Rightmove and see which family houses cost between £1-2m in London. The people who live in these houses are the the current target of the tax. Remember, once the house price is over £2m the extra allowance is rapidly eaten away.

These are not particularly “posh” houses and a similar house elsewhere in the UK would be easily within the allowance.

My DM lives in such a house. It’s in E Dulwich (or what used to be called Peckham) and is a 1940s, terraced, 3 bed house. DM has Alzheimer’s, so it’s likely she will have to go to a home for several years in a few years. She wants her children to have her home - particularly the youngest, who didn’t manage to get on the property ladder.

currently, these houses are selling for £1.2-1.4m. DM (an ex nurse of 40+ years service) was never rich, but never poor and the house is “it” in assets, other than her pension.

How nice to know she’s “not most people” and is wealthy.

@Justaboutalive my parents house is worth about 1.8m, I'm fine with getting a share of that. Don't see why I should have it all tax free?

In the USA, the IHT threshold is $12m (£9m), why is it only £325k for single people in the UK, you can hardly buy a one bed flat in London for that amount.

DD doesn't work but believes she works (writing online for a few hundred per month).

No, you're ok. I'm not a scrounging selfish fucker

Well exactly. Trusts aren't cheap because you pay 20% tax to set them up then 6% tax every ten years. How is that not paying their share?

I suppose it boils down to whom people want to pay IHT

Billionaires/multi-millionaires use various legal tools such as trusts to reduce IHT bills.

So it’s those with smaller estates and may not use accountants who don’t avoid it.

Married people with children can use various allowances to reduce or avoid IHT bills if they’re willing to discuss money and consider estate planning, which many older people find it difficult.

Single, divorced, and widowed people have fewer allowances. As do child-free people.

Instead of abolishing IHT, it might make sense to close the legal tools used by multi-millionaires and set a higher IHT threshold for smaller estates regardless of marital status, say up to a million.

She owns a ~£1.3m house, she is wealthy!

Married people with children can use various allowances to reduce or avoid IHT bills if they’re willing to discuss money and consider estate planning, which many older people find it difficult.

Single, divorced, and widowed people have fewer allowances. As do child-free people.

Why do you say widowed people have fewer allowances? Surely they come under the category of married people in your first paragraph (with or without children) since most married couples don't die at the same time, one will end up a widow/er.

@WeWereInParis You’ve clearly decided that instead of targeting billionaires/multi-millionaires to pay IHT, such as the Sunak family, the comfortably off who are just over the current low threshold should be the main payers.

So there’s no point discussing this further, is there?

The threshold is too low. It used to be increased annually but hasn’t been increased since 2009.

It also annoys me enormously that DP or I will have to pay IHT. I don’t want to get married but we own a fairly standard house in London which we may lose if the other dies because of the IHT even though we are committed, have been together a long time and have DC. It is (as it stands) a £200,000+ government penalty for not marrying.

I'll admit I don't have enough knowledge of the various ways in which the ultra-wealthy can avoid paying to know whether it's feasible to stop them doing it. I imagine it isn't.

But as I said upthread, if my parents die with their current financial position (and of course that could easily change) there'll be a reasonable amount of IHT to pay, and I really don't care. I have no issue whatsoever with that being paid before I get what will still be a very large sum of money.

No, she’s really not wealthy. She can pay her bills, if she’s careful and her children cover any big ticket items. Any spare money goes on carers and extra costs caused by Alzheimer’s, such as getting food out of the freezer and forgetting to cook it, or leaving coats/bags/shopping on the bus.

These are homes built for, and up until recently lived in, by lower salaried people. Her house is valuable, but unless it is sold, it is only money on paper.

My youngest sibling lives with her, in order to enable as much freedom as can be (Alzheimer’s ) and when she dies, or has to go into a home, he will become homeless. This is because of the huge disparity in house prices. In other parts of the country, children can inherit what is a very modest house. In London you cannot.

until the last few years, where house prices have risen dramatically, the plan was for DB to have a lifetime use of the house after DM doesn’t need it. He has already put career and life on a back burner for 5 years. He would then leave it to be split evenly to the next generation - other DB and myself ducking the inheritance.

I’ve sorted it so we pay nothing I would of hand on heart paid tax on the bit that would of been liable for IHT at a reasonable rate but not at 40% so now they will get nothing

It's not 40% of the whole lot. It's 40% over £325K, £500K, or whatever.
I'm happy to have paid taxes on behalf of my father's estate & am aware that my children will possibly have to do the same. I just wish I could dictate what the taxes are spent on!

But many parents are divorced and remain single so can only pass on £500,00. I think some folks here would be surprised at how many people are being hit with inheritance tax.

Any single/ divorced person with a house worth £500,000 upwards will pass on an IT bill to their children.

I know that why I put
”the bit which was liable for IHT”

I think the bigger question is why homes are free of CGT.

I don’t think it’s fair that people amass hundreds of thousands of pounds in price appreciation tax free by sitting in their home doing nothing.

Either keep IHT and lower threshold and rate so more people pay it but don’t necessarily pay more.

Or bring in CGT on home.

I'm a single parent in a house worth more than £500k. If I die, the estate will have to pay IHT.

But if I die before my ds leaves home, he'll receive my pension fund as cash so won't have to sell the house. Or he may not want to keep the house, it would be an odd choice for a young single man. Either way, he will have far more than I did starting out.

Plus I don't mind paying a chunk in tax. I'm not cash rich and I think the tax would be about £80k but if it goes to propping up the nhs or helping a senior school, I'm happy with that. I don't hate IHT. I rarely think about it.

Pension pots should also be taxable, I think that loophole will go soon.

The only people who will gain are loaded anyway, this won't affect ordinary people with average estatees, it would be better to increase personal allowances & reduce base rate of tax. But as we all know they only care about those at the top who are likely to vote for them.

To be fair I intend to retire and downsize/move further from London in the next couple of years, and then I'll help ds with a house of his own so I just need to stay on my feet a bit longer, and the chancellor's potential tax take will have disappeared.