Inheritance tax - a morbid tax but one which impacts a loft of middle class families

[mids2019]

Inheritance tax may be on the increase in the next budget but having just been through probate it for me thinking that iht really impacts a lot of lifetime savers and those with property.

Parents have already paid tax on the income they have saved so there is a moral question over the governments ability to.tax the money again. Is this really fair and isn't it a right we should have the ability to pass on our property to our children?

Also surely it is the middle classes that suffer as I guess anyone with serious wealth protects their assets through complex tax avoidance schemes e.g. footballers, celebs, bankers etc.

Those gifts could potentially be claimed back if you go into care and don't die before the value of your estate is used up by care fees. There's no 7 year exemption period when it comes to 'deprivation of assets'.

@BlackShuck3 the key question is if you knew you would need care or if you did it deliberately to avoid care fees. If you're healthy with no intention of going into care (we have written witnessed statements to let us die if we won't make a good recovery) then buying your son a car or paying a house deposit is perfectly fine. This is why you need a good accountant/lawyer.

you need a good accountant/lawyer
@sleepyscientist damn right you will, ever rising care costs mean that local authorities will become ever more rapacious. Those with wealth will stand a good chance of holding onto it, those with more modest means will be the low hanging fruit who are asset stripped by the care homes.

It's not inheritance tax you have to worry about. It is care costs, not £1,000,000 before you have to pay but £23,500. This will affect far more people than IHT, infact you could say that a lot of families having to pay IHT have been lucky that their parents did not have to pay for care at the end of their lives. It was due to be capped at £86k but the caring Labour gov has scrapped introducing the cap, and put up the smokescreen of cancelling the Winter Fuel Allowance.

@Lincslady53 the social care cap was never going to happen under the Tories. They promised it to win votes but then kicked it into the long grass. They knew they couldn't afford it.

Nice to have some time with all the items left behind. My Mum is in a council house, we got a month. No IHT as nothing passed on. Who's better off now? You or me?

You only need to gift amounts above your allowances - which could be up to £1m. The average stay in a care home is under 5y so would leave enough to pay for most people’s care.

@ivegot4cats

Nice to have some time with all the items left behind. My Mum is in a council house, we got a month. No IHT as nothing passed on. Who's better off now? You or me?
Good God. It's not a competition. Do you want me to come up with situations that make yours pale? Christ alive you must be hard work.

@BlackShuck3
Those gifts could potentially be claimed back if you go into care and don't die before the value of your estate is used up by care fees. There's no 7 year exemption period when it comes to 'deprivation of assets'.
But it has to be shown to be intentional deprivation of assets.

@ShanghaiDiva thanks for your reply, I only just saw it sorry!
If by liquid you mean actual cash in the bank, there wouldn't be more than about 50k tops. It would be all in the property. Which I live in. It's falling apart but in a very expensive/overpriced area. I don't want to leave the house as my dad bought it for us and it holds all my memories. But it will probably have to come to that as I couldn't afford the bills alone.

I have helped the 5 children with housing and will probably live 20 or 30 years AFTER that so I am pretty certain that is going to be clear of IHT but the house is another matter as my IHT allowance is only £325k because of where I live and because I am unmarried so the adult children who live here would be homeless due to IHT if I died tomorrow. I think Labour should abolish IHT as Sweden did. Most people who help a child buy a house or pay university fees etc and then go into a care home about 30 years later will not fall into deprivation of assets rules and most people don't need a care home and if they do most people have to pay for the whole thing anyway and won't get state help. My father spent £130k in his last year of life on at home dementia care - so much for the NHS cradle to grave [ NOT] for which he had worked all his life as a doctor - never there for you when you need it but Big State bleeds you of tax your whole life long. Would be much better to have a much small state and much lower taxes but both Tories and Labour adore very high taxes these days - both are socialist to their cores.

That rather depends on whether you think your money is yours, and you let the government have some of it, or you believe it’s all the governments, and they let you keep some of it…

Good question, who's money is it really?
Yes you earned it but no person is an island; modern life is only possible because of our collective efforts. A large portion of those are efforts for which we are not financially compensated.

But it's not your money if you're inheriting, is it ? It was your parents, grandparents, great-auntie Ethel's....

I believe that everyone in a society needs to make financial contribution to that society to support it functioning, and that taxing unearned income is a pretty good way of securing that contribution.

I do think it’s a bit unfair if they start adjusting the IHT thresholds. They have been frozen already for a while. It’s even more frustrating when MPs who have 2 homes and would normally get caught up in IHT starting hiring accounts to put properly and assets into trusts.

Also, people have made plans, given money away based on the current very punitive allowance, and they want to move the goalposts. Guarantee many MPs will be trying to avoid them now. Remember reading about several labour MPs and trusts in the past, won’t name names.

Actually, IHT is paid by estate, and then what’s left is distributed. I was looking at it from the perspective of the persons whose estate it is . I’m not reliant on or particularly interested in what I might or might not inherit from my parents. If I do it’ll probably be a meaningful amount of money, and I have no issue with it being taxed appropriately. But just seeing it as a short term cash cow is economically illiterate.

And of course everyone needs to make a financial contribution. But, the only way to raise meaningful amounts of money on an ongoing basis is if everyone pays more tax. It’s no surprise that most other countries in Europe have income tax/ social security costs than we do in the &30k to £70k ish bracket. And that’s because that’s where the most taxpayers are. It’s unpalatable to the average UK taxpayer, but that’s the reality. Everyone has to pay more, not just those at the top. There aren’t enough of them!

@RollaCola84

But it's not your money if you're inheriting, is it ? It was your parents, grandparents, great-auntie Ethel's....

I believe that everyone in a society needs to make financial contribution to that society to support it functioning, and that taxing unearned income is a pretty good way of securing that contribution.
But it's not you that is being taxed. It's the dead person. So it's not unearned income. It's saved money/assets.

Punitive! Many couples can leave £1m to their direct descendants without a penny of tax being paid and you think this is punitive? Good grief.

Actually you have longer to pay IHT when it is because of a property that you need to sell, but I certainly did feel that HMRC were breathing down our necks to get it paid. If only they could be as diligent with Amazon, Google etc!
We were very miffed to have to write a cheque £100K+ IHT for my MILs house, but that was because she had resisted moving for years. She lived in a complete tip (no carpets, no functioning bathroom at the end etc) when she could have lived in comfort.
Anyone sensible can arrange their affairs to minimise or even avoid IHT.

Think we can all agree that IHT is totally immoral, especially having to pay within 6 months. The South Korea families have 5 years to pay, which is much more humane. Anyone with decent assets is a fool if they stay in UK.

You are wrong. We can't all agree that. I am totally comfortable with the very wealthiest estates being taxed, and it's perfectly possible to defer payment if you need time to sell assets (although interest is reasonably charged)

I think we can all agree that the most selfish of wealthy people will do anything to cast themselves as poverty-stricken victims because they have no concept of how lucky they are.

There's a reason we have a byzantine tax system, it's so the wealthy and powerful can enjoy loopholes which the plebs cant afford to exploit.

Who can all agree?
Even within the 4% of estates that have to pay inheritance tax not everyone will agree at its immoral (I don't). It shocks me that people are outraged that they have to pay tax on hundreds of thousands of pounds of free money, that they didn't do one stroke of work for, meanwhile public services are falling apart.

@Kendodd that would be true if public service were falling apart but they aren't we expect too much of them. It's about setting a budget then seeing what you can afford vs the UK approach of set what you want then try to pay for it.