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.

But they did earn that increase by investing well. 42k wasn't a cheap house back then. We work for ours kids not the greater good, when we are gone it is them and any grandkids who will benefit.

Would anyone who supports it go out and work for free (not voluntary work) on say a check out for 40% more hours than you do now?

He talks about the broadest shoulder should carry the weight, I don't begrudge that for basic services but they shouldn't be carry the weight of services they don't need/want.

My approach is to downsize when I retire and pay off ds' university fees.

Keep my estate below £1m ( shouldn't be difficult 😁) and not scrimp during retirement.

If there is still more than £500k left, the NHS is welcome to a chunk of it. I will have provided my DS with a home, a good education and a secure childhood so he'll be ok.

What are you talking about? We all technically “work for free” based on your argument as we pay income tax.

That's awful. I can't imagine having to sell my parents home with a 6m turnaround!

If people who are dying now bought and bought and brought up families in 70s and 80s then very normal working class people will be passing on very expensive property to their grown up kids and that could be their only chance to finally get on the property ladder

The house price rise isn't their fault, and the kids need a big sum to live in the same area

Completely agree with this. Most people don’t really like paying more tax, whatever they claim. But for a society to generally be ok with it it needs to feel fair. Unfortunately at the moment we have a system that increases the tax burden the wealthier you are, until you get to a certain point where you basically pay nothing. Until they sort that out any increase in tax for everyone else is unfair.

Even though I stand to inherit a fair amount myself (nowhere near IHT thresholds!), I don't think inheritance is a right and I do believe it should be taxed.

Most estates are made mostly from the increase in property value, which was entirely unearned by the deceased and comes just from sheer luck of when they were born or able to buy. There's no justifiable reason any of that should be tax free. Maybe the amount you purchased the house for could be tax free, but any increase in value should not be.

As for other money, well no one is actually being taxed twice. The deceased paid tax on it when it was earned. The recipient pays tax on it when they get it. Seems fair. Not everyone will get an inheritance at all, so it seems fair that those who do should pay a little back into society as a whole.

Can we just have a reminder here that only 4% of estates are liable for IHT. Nearly 600,000 people died last year and only 27,000 paid IHT. Let’s not make out that this will affect every poor hardworking person. Not everyone bought a council house in London that’s now worth millions.

I disagree that at least some of property value increase is unearned.

Being a single mum, budget has always been tight and I have bought a series of four houses in need of restoration because that was all I could afford.

Over the years, I have replaced floors, kitchens, plaster etc myself, working late into the night. I have saved up and paid for new windows, kitchens, bathrooms, heating systems, rewiring, a new roof. I have repointed walls and chimneys and dug drains myself.

I have taken houses that had water running down inside walls and brought them back to be warm, dry, habitable housing stock.

In each case the value of the property has risen but it was most definitely not 'unearned' , with thousands of hours work put in over the last 37 years.

I am surprised that not more estates pay IHT. I wonder how much of that is avoidance.

I’m a single person and my house would be 2/3 of my allowance. At the moment I put all of my spare cash into pension funds and will keep those as far as possible whilst they are still IHT free (which might change in October).

When I eventually retire I am planning to look at annuities. They’ve not been good value for a number of years but I’d rather get slightly less value on an annuity which dies with me than have my estate pay tax on 40% on the excess fund value.

I read the book Die with Zero and whilst I didn’t agree with a lot of it, minimising your estate for IHT is a no brainer.

@Meadowfinch I agree with you, I don't understand the assertion that the price rise is "unearned". We bought a listed building from the NHS in London at imminent risk of collapse for peanuts. We spent every spare second and penny restoring it at the expense of any other discretionary spending. It took over 18 years to finish it.

We created a hell of a lot of jobs along the way particularly for traditional craftsman. It doesn't feel "unearned".

Also what might be a significant windfall inheritance for one child becomes far less significant when divided between 4 or 5.

37 years of house price growth is definitely doing the heavy lifting though.

It’s one of the very few means to tackle wealth inequalities and level the playing field a tiny bit.
HMRC data shows it’s only about 5% who actually pay inheritance tax, so that shows it is only the wealthiest who are affected at all. (I think on Mumsnet many feel like they’re in the middle of the distribution when they’re really not).

And it only affects the next generation who have already benefited from having wealthy parents - in their extracurricular education, social networks, university costs, rent and mortgage guarantees etc. Not taxing inheritances just makes sure that inequalities persist across generations. (But no, also having had first hand experience of it - it shouldn’t be such a nightmare to deal with at a difficult enough time)

No doubt you will have spent alot of time and money however you will have also benefitted from 18 years of London house price inflation.

That's true but if we had rented or bought a 60's box and not spent a penny on it the tax take for the government would be one hell of a lot less.

So the harder people work on something and the more they invest, the higher the tax bill.

That's generally the way with taxation. More money = more tax.
Presumably you bought and maintained a house primarily so you had somewhere pleasant to live, and would have done so even if house price inflation hadn't been so vast?

If you didn't buy it someone else would have done and they would be paying the taxes. No loss to the government.

@Fluufer Well yes but the point is it's a tax where you probably end up with a bigger liability if you spend your life working on your home rather than buying expensive cars, holidays, jewellery and gambling.

@Hothotdamage or what is more likely is that someone else would have taken advantage of the myriad of ways to avoid paying IHT at all. Again unfair.

Well yes, but you could have done that if you wished. You still could. You won't pay inheritance tax, you will be dead.

@Fluufer so you think a good tax is one which depends on people's willingness and ability to hire advisers to find ways to avoid paying it?

I don't have any data but I'd guess that of those in the IHT bands most do pay something rather than nothing. Those that dodge the lot will be a very very small amount as a percentage of the country. No tax system is ever perfect there will always be cracks. If they are legally moving money around to avoid paying it then it's the same as people using an ISA.

Where did I say that?