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.

No, it's wrong conclusion. In current climate it's best to estimate how much you need in your lifetime and stop working as soon as you have close to it. Then spend everything - you'll be bailed out by the state anyway.
Have you heard about FIRE movement? it's hugely detrimental for economy and future generations but great for those practicing it. I expect a lot more people to join it

People who want to leave an inheritance are not loading their tax burden on others, they have paid their share. They are the ones who carry the tax burden.

You say it’s not right because their children have not paid tax on it, but then neither have those who you think should bereft from it.

What are you talking about? No-one gets taxed when they die. They’re dead…they can’t pay tax 😆 Whoever inherits from them will pay the tax.

ifs.org.uk/news/wealthiest-1-would-get-half-benefit-scrapping-inheritance-tax-average-tax-cut-ps1-million#:~:text=The%20most%20recent%20HMRC%20statistics,tax%20will%20be%20still%20larger.

On the point of whether it's fair or not, It seems quite straightforward to me. My husband and I own a house in London which we bought nearly 30 years ago. It's worth a lot more than we paid for it. In due course our children will inherit it. They've done nothing whatsoever to earn that money and neither have we, other than not defaulting on our original mortgage, and not letting the house fall into rack and ruin. Why shouldn't some tax be paid on our unearned capital gain? Even after paying a bit of tax, our children are going to be in a very fortunate position financially compared with many others their age.

For what it's worth, I will never understand why large lottery wins aren't taxed either.

“A lot of middle class families” …. It’s generously estimated that around 7% of all estates will be subject to inheritance tax. Your version of “a lot” differs greatly to mine OP!!

How is FIRE detrimental to future generations?

The money's got to come from somewhere so if it's not income tax increases, then why not IHT? You are paying a tax on income that you have NOT already paid tax on - the deceased may well have done on some of it, but you haven't and will be rewarded very handsomely if you are paying IHT.

I don't have a problem with an increase but my parents are fuming (even though I'll be the one paying it!) They will likely leave a £2m+ estate (£1.5m house plus lots of other bonds, trusts and physical assets). Honestly, I wish they bloody spend some of it on themselves or share it with the family and enjoy it with us. It's quite odd IMO - they are generous in that they'll pay for dinner out if we go together for example, but given their level of wealth they really could treat us and their grandkids a bit more. I have literally no idea how we will afford the IHT bill if some doesn't go on care fees or they start spending it soon.

Which raises a question: before assets are liquidised/property sold, would we have to remortgage to pay the tax bill or am I missing something? We aren't big earners and simply don't have lots of cash spare (but yes, aware we will ultimately be well off)

I put a link above. HMRC have a procedure where you can apply to postpone paying the tax until you have probate and can start turning the assets into cash. You probably pay interest.

If you're single or divorced - the limit is £500,000 - as long as it's left to DC or charity, if not, the limit is £325,000.
How much do the Royal Family and other members of the 'aristocracy' pay?

@Gasp0deTheW0nderD0g cheers for that will take a look.

As in house sold rather than probate

Well strictly speaking the parents' estate is paying the tax

Personally I think inheritance tax should be increased. Yes parents have paid tax on their earnings, but most likely not on any increase in property values and the beneficiaries haven't paid any tax on it at all until they meet the IHT threshold

And no there isn't 'a right' to pass anything on, if there were then properties wouldn't be sold to pay for care fees.

I find the whole 'I deserve a good inheritance' thing really quite gross.

My father's estate paid some tax - had my mother died a few months later we wouldn't have done (didn't get the full residency amount for the property for her part). Their house was bought for £4000 in the 1960s & sold for £700K. Very little of that was from taxed income. I didn't begrudge paying a bit of tax on it (or rather, the estate paying tax).

I think 40% is just too high. Almost no other country has a rate as high as this that kicks in at this sort of level.

I would have no problem whatsoever with a 25% rate but as a couple who have spent 30+ years climbing the proper ladder by buying wrecks and spending most of our spare time improving them while never buying a new car or jewellery or having expensive holidays and so on, 40% sticks in the throat.

If we had rented all these years or not bothered with all the improvements the government's tax take would be an awful lot lower.

To be fair, it’s a nightmare dealing with the death of a parent in any circumstances. There are many children whose parent has died penniless and they can’t even afford a decent funeral.

No, IHT comes from the deceased persons estate. Their beneficiaries don’t pay a penny.

You can pay IHT which relates to the house in 10 annual instalments

Presumably you didn't buy just so your kids can inherit? You bought so that you can live in a lovely house and enjoy a mortgage free retirement. If your main concern is truly passing money down, you can downsize and do so now.

I'd make inheritance tax higher and have fewer loopholes (eg trusts). I think it would be a great leveller.

If an estate is above the threshold, it’s certainly cost effective to have a good solicitor deal with it. They have to experience of dealing with HMRC.

YABVU.
Where else do you suggest the tax comes from?
Hopefully this government will make it harder for the very wealthy to lock away money and they will pay their fair share too.

You do understand that it's not 40% of your total estate? It's 40% of whatever is above the threshold. For most people that's 0.