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.

@Another2Cats Unfortunately, property tax depends on the city and county where you live, rather than states as a whole. So someone living in NYC, for example, will pay thousands more than someone a few miles away in NY state. It also tends to increase by a certain percentage every few years.

It’s more like the London houses scenario that a PP described. An equivalent system in the UK would make London property taxes very high.

Thanks for clarifying - I already had, but cheers.

I think there are real dangers in taxing the transfer of farms to dc. Some big estates where owners are not farming it is different but lots of farms are family businesses and don’t make that much money. A farmer on the radio said their profit was £80,000 in a very good year divided between 2 families on 2000 acres. They were working all hours as farmers do. His land was worth about £5000 an acre he thought. He said that was way too high. It valued the farm at £10 million plus farmhouse etc. The big issue would be the need to sell the farm to pay IHT. No family business. All gone. It would be very disruptive to farming. Unintended consequences to hammer the perceived rich often backfire. I’m assuming lots of farms for sale very soon if this comes in. Why bother to continue?

I can see your point when a farm is handed down for farming by that same said family. but what about farms that aren’t family businesses, they do exist, and if they aren’t farmers, wouldnt those inheriting just sell up, and not have to pay a penny

Wow, I’ve Googled when the £3,000 gift allowance was set and it’s unbelievable: 1981!

Imagine what you could buy with £3K in 1981 compared with 2024, you could probably
buy a decent second hand car or it would be a nice chunk towards a mortgage deposit?

How can it not have increased for 43 years?!

But the land valuation is skewed by the benefits of the IHT exemption artificially raising the market price. And it would be very unusual for the entire farm to be owned by one person and inherited in its entirety upon their death. With two families working the farm and dependant on it for income that would be an extremely unfair ownership model.

Farms that are not family businesses do, of course, exist. Obviously businesses that exist in many areas of work are not family businesses, but some are. I think the danger is that far more farms are family businesses. Farmers learn on the job with parents and it’s a way of life. We also need food produced here. I just think it’s very disruptive to farming and what else could you do but sell? No one could pay IHT on land values like this.

Lets hope your in -laws don't need to pay for care in the future or need help with their rent when they have given away their home.

MILs estate is worth close to 2.2 million so our financial advisor has told her to spend and gift as much as possible to stay beneath the 2 million mark as you get pummelled if its over 2 million.

@Negroany yes, I haven't explained very well - I was thinking about trusts tbh.

Maybe a CGT charge on death would be more palatable? Would also see older home owners downsizing I imagine too.

In what way @Blanketyre ? I am not aware of any higher rate than 40% for large estates, but I may be wrong.

I think there is a lot of iht avoidance by investing in businesses that attract 100% relief after two years. Also PETs possibly should have a longer taper or be limited to a million quid or something. I think the very rich benefit hugely as can pass down a lot, whereas if you own 1 house you live in it or need it for care costs.

Bromptotoo my mother has not made a gift but if she did theoretically there is no limit to how far back the council could go if they were looking to claim money for care. My mother is independent at the moment but she is not too well so I think she may need some care soon. Theoretically if you can prove you didn't make a gift in order to avoid care fees (depreciation of assets) the money should not be counted but in practice that might be difficult to prove. There was a case where a grandma sent money for airfare so a grandson could travel from the states to see her when she was ill and the council demanded this money back. When you are older your money is not really your own to give away as you wish, however you are allowed to spend it on yourself.

I believe that @Blanketyre is likely talking about the tapering of the residence nil rate band (£175k if main home left to children).

For every £2 that the net estate is over £2 million then it is reduced by £1.

So at £2.35 million the band would be zero for a single person or £2.7 million for a surviving spouse.

With an estate worth £2 million then a single person has a threshold of £500k and will pay IHT on anything above that.

With an estate worth £2.35 million then a single person has a threshold of £325k and will pay IHT on anything above that

Yes thank you that's what I mean.

She currently spends about 500 a month but has 3300 coming in every month from pensions and assets so needs to spend more!!

I've just paid inheritance tax following the death of a family member and I completely agree with it. I'd be happy for it to be increased. The person inheriting is getting free money and hasn't paid tax on it.

I'd much rather the tax thresholds were raised so those on lower incomes would benefit.

Good for you! I resent it, but like everyone, my MILs estate will still have to pay it. I don't think the government care if you pay it willingly or not.

I doubt there are very many family farms of 2,000 acres where they follow the traditional model that Farmer Giles owns everything outright, and the son works for his father and inherits nothing until the day the father dies and he inherits everything in one go. It's such an inefficient model for a farm business on so many levels.

Ah thank you @Another2Cats

DM’s estate will fall into IHT but not at those lofty heights so I didn’t know about that one 🙂

Good for her. I’ve never heard of anyone needing to sell a car before.

It used to be that giving gifts and then living 7 years after meant that they were not considered to be deprivation of assets. I am not sure that applies anymore?

The seven year rule is for inheritance tax purposes.

Deprivation of assets refers to intentionally reducing savings and/or income to avoid having to pay for care costs.

They're different things.

@DogInATent Farms have got bigger but even one of 1000 acres is highly likely to be a family farm. Of course several families can be partners in a farm. It’s a very standard form of ownership. Parents and dc. Or just dc. The basic issue is having to sell a business to pay IHT so you lose your livelihood. I’m a farmer’s DD (farm long gone) but there really are very many family farms. I agree the price per acre is artificially high but if you pay at 40% above (say) £500k, you will need to sell. It’s an artificially high valuation and giving the business away might help but that could be taxed too! This is why we have had business exemptions.

@Flutterbycustard Well, if the Budget sensibly raises the gift allowance from the number set in 1981, you may not need to pretend that you're spending on fruit machines!

I'm still gob smacked that it hasn't changed for 43 years.