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.

Only 4pc pay inheritance tax so I know I am not going to troubled by it. My partner is in the top income bracket but we don't have a pot to p in no house etc and are not married. Why do people speculate when it doesn't affect them!

I fully support inheritance tax and won’t begrudge paying it. Tax has to come from somewhere and think it’s much more manageable on a newly acquired lump sum than on your wages and day to day living.

Yes but you have to pay tax upfront before you receive your lump sum.
Time to start spending and gifting (on a regular basis out of excess income) plus lump sums (and avoid getting run over by a bus)
And council should only chase for care fees if you give money away once you have started needing care to get down to that £16,000

Don't they tax wages as well? Do you think if they increase inheritance tax and other taxes they will stop taxing wages? Tax on wages will increase in real terms because the don't increase thresholds. Mind you they could do something nice in the budget, you never know!

Don't have a problem with inheritance tax (would rather pay that on money from my parents than see income tax increase which will affect younger, already poorer people). I also support including DC pensions in IHT. At the moment they pay out tax free on death before 75. Money free of tax on the way in and out!

The local authority can only pursue this if your mum needs care (many people don't), if the costs of this exceed her assets (presumably she isn't gifting you everything she has so she would still have some assets to pay for some care if needed) and if you mum gave the gift with the expectation that she needs care.

So if she gives you a gift when she is healthy and independent and then years later she unexpectedly suffers a stroke and needs care, that wouldn't be deprivation of assets.

If she already had illnesses that were expected to cause her to need care in future at the time she made the gift, that may be deprivation of assets.

If the local authority did pursue for deprivation of assets it wouldn't be a fast process and worst case scenario you could remortgage to release the funds required.

I'd absolutely accept this gift if offered, in most cases the money would not need to be returned, and worse case scenario is there is a small chance that you would need to remortgage to release some money.

Labour really are pursuing the politics of envy.

My father in law is paying £75000 a year for his care home so the £16000 limit will be met fairly quickly. His wife will keep the family home but has been advised to give up the car which belonged to her husband as she would be pursued for the cash if money runs out. She has refused as she needs it to visit him as there is no bus and her pension does not stretch to taxis. Money was in father-in- laws name and came from careful investing of small amounts of cash which he spent a lot of time on with view of a comfortable retirement. Unfortunately early dementia has struck.

Why do people get so worked up about IHT? It affects about 4% of estates. And if you’re inheriting north of a million I think it’s entirely reasonable that it’s taxed.

I agree with IHT in principle (and suspect I may end up paying some on my dads estate when he dies, so it’s not just that I’m supporting a tax which doesn’t affect me!) I would reform it though so it’s not per estate; I’d do it so each person would have a life time limit of X amount they could inherit, tax free, in their lifetime without paying the tax, after that it’s taxed.

however I did not know you had to pay the tax before the money was released - what an odd system.

My dad was explaining one potential change Labour might make recently - something to do with where/how his money is invested means a big chunk of it won’t be subject to IHT, whereas his house and other money will be. I don’t fully understand how this money is invested but IMO it does seem like a loophole which needs closing, despite the fact if it does I’m likely to be tens of thousands of pounds down! Better that that increasing VAT or income tax I think.

I just think you shouldn’t ever count on inheriting anything, if you do it is a bonus and if it’s taxed then it’s still more than the nothing some people get when someone dies.

There are different inheritance tax (IHT) allowances depending on the situation of the deceased.

For example, a married couple that leave everything to each other and their children can leave up to £1 million to children without paying any IHT at all.

Then, if there is IHT to pay the executors can request that any banks or other financial institutions holding accounts for the deceased pay the money directly to HMRC to cover the IHT, you don't need probate for this This is done using form IHT423.

Then on form IHT400 you can also say that you want to pay by instalments. You put a tick in box 110 and then have to pay 10% of the tax due, the rest is paid off later either in instalments or when you later sell the property.

If you cannot raise 10% of the tax due then you can apply for a "Grant on Credit" where you do not have to pay anything upfront if there is no money in the estate.

HMRC will then put a charge on the property until the IHT is paid.

In both of these cases, interest will be charged so it's best to pay off the IHT as soon as possible.

https://www.gov.uk/guidance/applying-for-a-grant-on-credit-for-inheritance-tax

Hopelessly, I wish I knew how to quote you but my husband absolutely refuses to accept money off mum, particularly after what is happening with his dad. My mum does have health issues and in fact was taken quite ill this week ( hence I am shattered after gruelling 3 - day hospital waiting room marathon trying to get some help for her) and I think she will need to pay for some care soon. Hopefully at home, as my father's care home killed him off pretty sharpish, even though it was expensive. I have caring duties at home with poorly kids so I can't do both.

Exactly.

I just got the bank to pay it directly from the cash. The property has still not sold but IHT is paid.

I support IHT, as did my mum. We've paid about £25k. I asked mum a few years ago if she wanted to take some measures to mitigate it, but she said no, she felt the tax should be paid to support society. She was a Labour voter. No envy, the estate was over £1m.

Not the best financial planning OP. If your DH or BIL go bankrupt or get divorced, the house may have to be sold leaving your PIL's potentially homeless and while if they live for 7 years after the gift, it's true that it falls outside the estate for IHT purposes, it can still be considered deprivation of assets for care home fees.
The number of people who do have to go into long term care is relatively small despite all the media scaremongering, so it may be worth the risk if there is sufficient family money elsewhere to cover it if it does happen, or at least be prepared to sell the house or earmark the proceeds just in case.
He also needs to stay on good terms with his brother.
It happened to a friend of mine. Her parents transferred the house to the 3 children many years ago. After her Mum died about 10 years ago Dad became very frail and moved into a fairly expensive residential home. The house was sold and money paid out to children. Dad had a teacher's pension and covered his own fees for many years but eventually ran out of savings so it had to be topped up by £250 a week or he would have to move to a cheaper home. He was 95 and blind and deaf by this point. Friend's brother and sister refused to contribute so friend was left to pay it by herself for 4 years until he died.

I’m picking up on this poster’s comment, not on a personal view
Some people are really committed to the notion of redistributing wealth to tackle social inequalities.
It’s so easy to say this until it’s realised that it’s not someone else’s wealth but your own and potentially that of your inheritors.

Early speculation appears to be around the exemptions that are also used by the wealthy to park wealth (AIM investments, business relief, farms and the like). Although farmland is used cynically (billionaires buying thousands of acres in Lincolnshire to park their wealth), I'd be surprised if the government would remove farms entirely as this would risk many farms into forced sale on death of the owners.

I think the issue is that it impacts disproportionately on some people and some estates.

When my DSis, a single mother, died of cancer in her late 40s she owned a two bed flat in London shared with her 18 year old DS. Because the flat (nothing special - part of a Victorian conversion) was valued at £650,000 IHT was payable by her son on the amount over £50000. So her son having just lost his mother was also faced with losing the family home.

It has always seemed unfair to me that two parent families get a £1m exemption on the family home whereas single parents, who tend to face greater struggles in life, get only half of that. And there is a huge issue over London house prices where £500000 gets you very little - whereas an equivalent amount in the north would fund something really nice.

Thanks for easing one of my worries
Now to persuade DP to think about the future

@modgepodge It’s the estate of the deceased that pays the IHT if due. It’s paid before any beneficiaries get near it.

The best advice is give away as much as you can. 7 years at the moment is all you need to live after the gift. My DDs have already had quite a lot. We plan to continue giving. Or we will have to have a trust. We do want our dc to benefit from what we have and hopefully won’t need a care home. Most people don’t.

Lots of people got their money from house inflation. Anyway, I’m just off to move a bit more money around!

I think it's great.

But only because my MIL has changed her will to avoid it and now she'll have to change it all again.

So it's petty but I'm enjoying it. Can't stand rich tax dodgers.

Nail the absent fathers - in Canada they threatened to take my friends passport away.

This is worth a read, and not just for potential tweaks to inheritance tax. There are a number of related taxes that broadly come under what the public would describe as inheritance and some of them are basically very big loopholes for specific circumstances.

TLDR: An adjustment to inheritance taxes does not necessarily mean a change to either the IHT threshold or the IHT rate. It may mean closing/narrowing one of the exemptions.

https://taxpolicy.org.uk/2024/09/25/the-tax-longlist-34-ways-rachel-reeves-could-raise-22bn/

Well care home is £2,000 a month roughly ,24,000 a year -most people only live 2 years after moving to a care home -so say 72,000 to play safe.
Give away the rest -tell them not to use to commit to eg a mortgage in case you live long. done.

IHT doesn’t stop money going to your children after your death. Just that there is 40% tax to pay above a (pretty decent) threshold. So I don’t understand posters who say “didn’t work hard to pay more to the government” etc - the heirs still get the majority of the money.