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.

They wouldn't but your executor is under a legal duty to declare it, so if you're all happy to commit a criminal offence then fine.

Just to be clear for anyone panicking: it's not a criminal offence to give your money away as PP thinks! The executor has to fill in form 423 and it may be that the gifts become liable for tax. That's the worst that can happen.

Thanks @Namechangeforadhd was about to say this!

We did this with my mother’s money for the last year of her life. We worked out her surplus income and some of the difference went to my brother each month We were meticulous in making sure enough was allowed for depreciation on various assets and household repairs. Paid out an additional £3000 a year to the grandchildren over some years and I was making small £250 gifts online to family and friends from her hospital room on her behalf until the day before she lost consciousness. We thought we had brought the estate down to £1m but my dad didn’t get the full £500k allowance as he died in December 2019, so we lost some there and then there was a house price hike so we were just over the limit.

When DM died about 3 years ago. her estate was near £1.1 million and the IHT came to about £250k. There was a life insurance policy in trust which wasn't taxed
So DB and I inherited half a million each.

I don't feel hard done by.

But there's a lot of leeway between nothing and 40%.

People of that generation didn't work any harder than others, they just gained hugely from the massive house price increases. They were just lucky.

DM bought her 1st house in 1960 for just over £3k. Subsequent moves were to houses of similar value as she made sideways moves to different towns without borrowing more. Her last house sold for £710K.

An online calculator tells me that £3k in 1960 is worth about £95K today so there's over £600k from rampant property inflation which none of us did anything to deserve (other than avoid bankruptcy and keep up with the maintenance)

With farms, I think they could have a scheme where the IHT accrues but doesn't need to be paid until the farm is sold. It would get round the using farms for investment purposes but would allow family farms to be passed on.

@Imgoingtothebeach Yes, that why I’m moaning about the £3K gift allowance being static since 1981. Guess who benefitted from £3K being worth a lot more in the 1980’s, when they could buy houses cheaply? The same generation whose houses have appreciated massively!

At least if they could gift more annually tax-free, it could help younger generations out.

They can gift more - they might choose not to (my mother simply cannot grasp that gifting more that £3k a year isn’t “wrong” in some way, even though we patiently explain that, at worst, such gifts are neutral and at best positive if she lives more than 3 years from making them)

@AhBiscuits "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 is. It's the person who inherits the money having g not worked for it at all that pays tax.

They'll probably bring in CGT on second homes passed on so there would be CGT and IHT payable, at the moment CGT is not paid on inheritance.

Well said (and DM's estate will be subject to IHT!)

I expect my parents estate would be due to pay iht. But I think it is right to pay it. Most of it woudl come from property going up in value which is unfair on young people. If you pay iht you are very wealthy and should pay. This country is already so unequal

CGT and IHT on the same property?

Yes and potentially other investments. At the moment if you die CGT resets to zero but apparently this may possibly change so that the asset would pass on at the price originally bought and then the beneficiary would pay CGT on the uplift to the value at death and then IHT on top. This wouldn't affect main homes I wouldn't think just other investments be those property or shares etc.

I agree with this.

Best to spend and not save as taxed to the hilt by Labour they are all for those on benefits….hope they don’t last a term they are dreadful.

what will be will be no doubt more taxes all
round when we are already taxed to
the hilt, pay high energy costs and very high mortgages/rent …U.K. is grim now really grim! Sad to say 😞

@SheilaFentiman Exactky, that’s the problem. Plus if they’re older, they’re afraid of dying before the seven years have passed..

It’s quite cunning to keep a tax-free allowance the same for over 40 years really. it disinclines older people to pass on their money to their younger relatives.

Wow. I have a relative who owns 4 properties and flits between them. This will put a spanner in the works of her IHT planning.

It's not a criminal offence don't be ridiculous 🙄

No, it's the estate that pays IHT.

You are not taxed on the amount you inherit. Tax is paid by the estate before you inherit it.

But they haven't been taxed on the 'gains' (increases) the house made and the investments made. If the parent in question had sold/cashed in the investments (presumably shares or share-based) CGT would have been payable but as they died, there's no CGT as the estate would be assessed for IHT - if the estate was below the threshold no IHT was payable.

@DogInATent "You are not taxed on the amount you inherit. Tax is paid by the estate before you inherit it"

But after the owner of the estate dies. So it doesn't affect what they can spend of their "hard earned money"