Inheritance tax changes

[AhBiscuits]

Any speculation on what changes will be made? Is anyone trying to put measures in place before the budget?

My dad died suddenly in August. His estate is not liable for inheritance tax as he left his home to me and my siblings, he had inherited my mum's nil rate band and it was under a million in value. I have made sure to get the probate application submitted this week though, because who knows?

My inlaws have just signed their second home over to DH and his brother and are now renting it from them. They expect to live much longer than another 7 years. They are hoping this will remove this property from being part of their estate. But again, who knows.

I don't agree with inheritance tax. People have worked hard for their money and were taxed on it. It should be theirs to use as they wish without another tax. It was really important to my dad, and it clearly is to my inlaws, that we inherited when he died. He lived frugally, despite our protestations, with this in mind.

i think just expect everything to be massively taxed and get on with your life. It’s not worth fretting and worrying about. We start with nothing. We take nothing with us at the end. I can’t be arsed to be worrying about my mother’s death and how much tax the government will take. My assumption is it will all go in care home fees anyway.

I have no speculation but I agree with you. It's incredibly wrong to tax twice and it's something that really annoys me despite not affecting me in any way - I don't have much money for a start and doubt I'll receive much inheritance from anyone (unless my own father - never met him - is a multi-millionaire who plans to leave me everything).

Incredibly sorry for your loss x

I inherited well on my Mother's death but most of it was the value of her home and the gain in capital value of investments.

Can somebody supporting the 'it shouldn't be taxed twice' argument tell me where those gains were taxed previously?

Ironically, I gained the investments free of tax. If she's sold them CGT would have been payable.

@Bromptotoo - presumably your Mother bought her house and investments with her or your father's income gotten from work, which was taxed then via income tax.
Basically for most people everything they have - and leave to their children - they bought with the proceeds of their work, on which they'd been taxed via income tax at the time.

It’s a basic human instinct to look after your descendants. If the inheritance tax rules change that severely we will just look to reduce our estate as much as possible while we’re still alive and kicking! We could pay for kids holidays, cars, bills, general living expenses for example. We haven’t worked hard to hand it over to the government!

@SeulementUneFois of course it was.

It wasn't actually that linear but a house bought for £10,000 in 1969 would have sold for well north of half a million when Mum died 50 years later. That gain is entirely due to appreciating value of housing which was not taxed.

Recognisisng that tax has to fall somewhere what's wrong with it falling on what to all intents is a windfall from specualtion.

I think the threshold will come down but idk what else will change - perhaps the “main residence to direct descendent” rule. Currently the “rules” around gifting are really odd - perhaps there will be some movement there but what there will be idk. I don’t think gifting will be abolished as I think the transfer of wealth from silent/boomers to gen X and below does very often get the money out of savings accounts and back into the economy. There are whispers about the agricultural land exemption which will be very unpopular but only amongst a very small number of people. I don’t really know much about it - is agricultural land owned mainly by individuals or companies or trusts? Maybe the rules on inheriting a Ltd company will be a target. I read once the Dyson is one of the biggest agricultural landowners in the UK, entirely to get his estate out of IHT (idk if that’s actually true)

My Mothers is widowed and robustly healthy, but elderly. her assets are probably around £2m, including a £1m house. Who knows what will happen and how much she will spend but I’ve no problem with IHT generally. I’m not doing great financially atm and have lots of expenses (too many dc at expensive stage and fledgling business alongside ft job), siblings are better off but not wealthy. We all work hard - dh and I have 2 jobs each and all my siblings, their partners and their older teen dc work. We pay tax on the income we’ve “worked hard all our lives for”. Relatively speaking my mother hasn’t paid much tax - she’s never worked full time and retired at 50, (although my dad, whose allowance is tied in with hers, did work ft - but retired at 60). They made their money through lucky house moves and kept it through frugality. The working population like my siblings and I would be better off, in my non expert opinion, with a reduction in income taxes and VAT, rather than a reduction in IHT for the few it affects. Why is income through “working hard your whole life” or “buying a new coat because it’s actually freezing” taxed more than passive income through inheriting the capital gain on your mums house? Where will the tax come from if we decide IHT is unfair because it’s money people “worked” for? From actual work - that’s where.

It may be instinctive to try to help the generations down from you but when push comes to shove it’s massively easy to avoid your estate becoming liable for IHT by proactively giving money away. In reality people don’t. Turns out it’s also instinctive to hold tightly onto your cash until the last possible minute. Not everyone, obviously, but lots of people. It’s really quite tricky to save your whole life and they make the switch to spending or giving. That said, I do know lots of people who seemed perfectly normal become absolute monsters when it’s come down to spending their parents “money they worked hard for their whole lives” on care and comfort in those last few months/years so giving everything away is a definite risk.

You can't really gift money to family as if you need it to pay for care your family will be pursued to pay it back. They can pursue this money from however far back they choose. We have refused financial help from my mum for this reason. She offered us money to help buy a bigger house as ours is tiny and the kids have to share a room. We refused because we could be forced to sell up quickly if the money was needed back to pay for care and we could loose our home. If there is any money left over from paying for care the government will take a big chunk if what is being rumoured is true. My kids are vulnerable without sharing too much details but neither I nor my mum will be able to leave money to help them. And the government are not proposing to use this tax money to protect the more vulnerable, they are proposing more cuts. I don't understand why people say the rise in house value represents a windfall. Most people have large mortgages to pay and most of that is interest, you pay for the value in your home several times over. The increase in value is not a windfall surely so why do you then have to pass anything left over to the government and not your family?

People have worked hard for their money and were taxed on it

Only they weren't in a lot of cases. People have gained hundreds of thousands of pounds or more in property wealth simply by spending the last few decades in the property market. It's absolutely fair that some of this should be taxed.

Younger people don't have this advantage. They can't buy family homes on a single manual worker's salary and live comfortably while gaining an asset that has made them richer than most people. So they shouldn't be disproportionately paying taxes to protect their parents and grandparents from being taxed on untaxed wealth. Because if asset rich (mainly older) people don't pay tax, someone else has to pay it.

id be perfectly happy to reduce income tax and increase inheritance tax.

Seems much fairer to me to tax freebies more than earned income

Well tax comes from somewhere- but you think it’s better to keep hammering working people who btw also work hard but probably don’t have the luxury to afford one home let alone two!
I think people like your in-laws have zero right to any help in their old age given their tax avoidance scheme, I hope they don’t complain about the state of the nhs!

And before you try and bite OP, I was made an orphan at 20 and paid inheritance tax on the only money and help I would ever be given by my late father and mother- and both my parents died before taking anything from the state (ie. Before pension age!)

No most people have not got wealth from property speculation, but from paying the mortgage on the family home. For those people who have got some wealth it's quite reasonable to give the younger generation some of it in your will once you have paid for your nursing home ( at the same time subsidising those who don't have enough to pay for their own care). Why can't we leave our children something in our will? If we go and spend it all on cruises that's ok, but otherwise we must hand over any spare cash to the government?

Trusts can be set up - which helps and might be worth doing.

As far as I can see, those only help seriously wealthy people.

We have another two weeks of this guessing and worrying. Most unfair or the Government they should have done this quicker. They did have total access to financial and tax details so no surprises should have been unearthed.
We shall all be worse off except for loyal union members like ASLEF and other Rail unions an extra £300 for a day.
CGT should be indexed to see what has actually gained.
They make a speech about wanting investment then they want more tax from those investors. They want more public transport but are cutting money for councils for bus routes.
They want to expand Heathrow and yet they want extra tax on flying.
They really need to work harder to sort this out. The next Gen Election will roll round surprisingly quickly.

As to the private school VAT, I have never been in the position to afford private school, but I don't begrudge those who can. And sometimes it's needed to get the SEN help needed. Education should not be taxed. And anyway where is the justification of taxing people who save the government money by paying to educate their own children? At least the wig tax was a tax on luxury, but this is a tax on saving the government money. Did Starmer get taxed on his luxury freebies?

I don't agree with inheritance tax. People have worked hard for their money and were taxed on it. It should be theirs to use as they wish without another tax.

I think its a good thing (my dm estate will poss by over 1m) its money you have not earned, and it goes in to the state to make everyones life better (or thats what taxes should be for)

Its like the argument on VAT on private schools

and by spending your money you are creating a flow of money, instead of hoarding it - you will pay for holidays, that employ people, you will buy more cars and things which increase wealth around and we all prosper when our economy is doing well

OP, I didn't think you could "gift" a second home to your children without CGT?? I assume your PIL's have taken advice??

Indexing CGT seems like a good plan, but would be tricky to administer. DM had a second home which she sold to cover her care home expenses. Yes, she made a nominal profit in it over the twenty odd years of owning it, but by the time you took into account inflation, mortgage costs, improvements, and GCT, her profit was actually only a few thousand! No rent as my brother lived there rent free...... A whole other story.

My mum looked at a trust to help vulnerable relatives ( my brother and kids). We have some serious health and MH issues, but it was too complicated. Also tax is payable on trusts and actually more than if money is left directly in a will. Anyway all the rules will change. She will need money for her care at any rate. That is what the wealth you build in your family is for, it's security for you and your family. The State increasingly won't take care of us. They are not proposing to use this money to take care of us.

They’re only teenagers at the moment but they’re already doing quite a good job of helping the economy with my cash! 😀

It’s not always “bitterness”. Some people are really committed to the notion of redistributing wealth to tackle social inequalities.

I mean taxed 3 times surely? Because most renovations/repairs/upgrades would have had vat applied at 20% - that's another tax.

The government takes a slice of any money that changes hands each time - income tax, vat, stamp duty and eventually inheritance.
What worries me is when the actual inheritance tax has to be paid - where is my family as executors going to find money to pay the tax man before the estate is released or have I got that wrong?