Government looking at inheritance tax

[HarryVanderspeigle]

It says on the news today that the treasury are looking at reforms. Potentially looking at increasing the seven year rule, or a lifetime gift allowance. I don't really see how that would work as we all know that wealthier people will spend more on their children for things like weddings, university expenses, getting on the property ladder etc. But if it is to be reformed, how would you do it?

I often wonder if the objection is because 40% is so high. Would it actually raise more if it became 20% on estates over £100k? I can't see them putting the percentage up and we all know that very rich people find loopholes anyway.

People with lots of money don’t necessarily have accountants though.

the realty is that without probate executors have no means to access a bank account.
Without access to a bank account executors can’t declare gifts
It’s a Catch 22

As such HMRC can’t declare an executor has knowingly committed fraud.
I never went bank over 7 years of my families bank statements to see if I could track every large figure going out. Even if I did I’d then have to request from the bank who that money went to and then request the recipient paid back 40% of it. Is that what HMRC expect executors to do
Or perhaps HMRC request money back from every individual.

The whole process seems like a complete shambles

If you are making gifts out of income or other gifts it’s sensible to keep a record with amounts, recipient and dates. My dm did this and I then transferred all the info to IHT 400 and supplementary forms.

Yes they are looking. When DB died the solicitor had to ask us if DB had made any gifts. We are oblidge to answer honestly. In order for the amount of iht to be calculated all the deceaseds financial affairs are submitted to HMRC and a final figure agreed. Which has to be paid before probate is granted. Maybe HMRC don't thoroughly check every application, but they absolutely do challenge some and they do have access to accounts.
If you keep cash under the bed, you might be okay, if you do bank transfers, it's visible to them!

Someone on TV, can't remember who, said what about things like jewellery or paintings that can just be passed on with no paper trail.

Wealth managers fear for future of UK’s ‘generous’ inheritance tax loopholes

At present, in the UK, anyone can give up to £3,000 free of inheritance tax (IHT) annually. Another option is the “potentially exempt transfer”, also known as the seven-year rule, in which any gift can be given free of IHT as long as the benefactor survives seven years. If the benefactor dies before the end of the seven-year period, “taper relief” will reduce the tax payable on gifts given between three and seven years before.

The UK could impose a 10-year limit on gifting, or follow the US by capping the amount someone can gift in a lifetime, he said.

Tax experts have flagged that the government could in the Autumn Budget look to cap the total amount that a person can “gift” over a lifetime without incurring inheritance tax, so long as they live for seven years after passing on the assets. This seven-year timeframe could also be extended, they have suggested.

Yes, it hasn't been announced yet, but FT are usually pretty accurate with their predictions

That's the essence of it. At present UK has one of the worst (if not THE worst) IHT regimes, at least in developed world. Labour want to screw it even more. So for people with some assets who wanted to pass it on to their kids the options will be either to leave UK and give up tax residency or to stop working / dissolve their businesses and try to spend it all during their lifetime. Consequences of both will be horrific.

Reform already announced that they will abolish IHT. So our options are either economic ruin where there is equality in terms of everyone is poor or Handmaid Tale with Reform and poor left to rot. Slow clap Labour

Yes it is. It’s your transaction cost and in reality there is often no profit. You have got an asset though and it’s the asset that you pay the tax on - the same way as if the money was in the bank.

The sooner we drop this ridiculous notion that everyone has to be in an equal position the better.

Society simply cannot function that way.

I am in a good position at the moment financially. I have enough money to see me through retirement and to then enable me to pass money on to my kids. If I cant do that there is no point in me continuing to work and pay (considerable) tax. So I would stop working at this point (early 50s). Just like all the senior NHS consultants did when they could no longer boost their pensions.

Well of course you can @Nevertrustacop
But should you? No.
Honestly, all the people on here giving their crafty little dodges - I bet they all sneer at benefits claimants (or dodgers). If the rules say you should declare then you declare.
Ive been through this with my own parents’ deaths. Our solicitors who had to handle the complex probate crawled all over my parents’ bank accounts for instance, to see if there was anything that even looked like a gift. And it was all itemised for HMRC.
now I realise our affairs were bigger and more complex than most but we just went yeah, ok.
And paid up like good ‘uns.

this kind of thread exasperates me.

Yours dm was very organised and you were fortunate she told you about her financial affairs.
That’s different though
Executors won’t necessarily know and certainly have no right to know during a persons lifetime.
some won’t even know they’re executors, my db didn’t.

I do wonder if executors come under fire through no fault of their own.
The system needs changing I think

I'm happy to pay my taxes, I was adding what was said to illustrate how difficult to administer the tax fairly is. I don't have any jewellery to pass on, well I have a £10 watch and a wedding ring but I don't imagine HMRC are going to worry about my haul.

However much your solicitors scoured the bank statements they wouldn't see something like a £10k diamond necklace that your gran gave your mum and she gave you.

Some things are free of tax though
Children’s clothes, some foods etc. A persons home is one of those. That’s why it’s not taxed.

of note my comment doesn’t relate to current IHT rules.

Once they accept the executor role though, they are obligated to fulfil their responsibilities. If they don't feel they can do that, they should relinquish the task and appoint someone who can.

This is exactly the point I've been trying to make.

And I did retire much earlier than planned exactly because of Labour budget. With a very substantial loss for HMRC.

Agree
the point though is that without access to bank statements no one can fulfil their executor obligations.
Not accurately
So we’re all just stabbing in the dark unless HMRC change the process

That is exactly what they have to do. My friend's parents left her their house and she had to take out a loan to pay the IHT, even though she was clearing and selling the property. It was very expensive, by the time she had paid the estate agent and the interest of the loan. All at the same time as dealing with grief.

When my son died, he literally had nothing to leave, having previously lost his job. We got a really horrible phone call from HMRC demanding to know why DH hadn't filed his tax return, 8 months after his death. We honestly didn't realise we were supposed to. They were going to fine us for late return, but eventually, very grudgingly, they said they wouldn't.

HMRC always go for the soft targets.

I really don’t understand why HMRC can’t wait till the money is in hand. We don’t pay tax bills for anything else until after we’ve been paid
With the exception of stamp duty at point of sale. So why not a charge on a deceased persons property and at point of sale they get their money

If there is no property then an alert or lock on probate accounts.

It’s nonsense to pay the bill before you have access to the assets and money

Pensions count as income which currently even seems to include tax-free cash. The general rule is, once you put that into your bank account it will turn into capital after 2 years.

This will only ever be tested at probate stage and most tribunal cases have confirmed this although HMRC will not confirm a fixed timescale.

If she has tax to pay the estate was over a million and she only paid tax on the bit over a million, she was very fortunate and quibbling about taking out a loan and paying the estate agent can't have left her penniless.

Just had a look and apparently you can choose to pay the tax due on the property in installments over ten years. Seems perfectly reasonable.

That’s good. Is that just for those not selling it though and perhaps moving in themselves

The way I read it I think it would apply if you were living in the house yourself but I think tax can be confusing.

Yes, agree we were certainly very lucky. Dh is one of the executors for his parents and he has no clue regarding their financial records.

There was no quibbling at all. She just got on with it.

So she never mentioned it you just worked out what she was doing and what it cost her. While youve got your crystal ball out could you give me the numbers for tonight's euromilliomns, I could do with £200 million as I have some bills to pay. Thanks in advance.

The trouble is you don't know what you don't know do you. I wonder what happens if you do everything by the book, pay the bill and life goes on then you decide that box of jewellery you thought was worth £200 you decide to sell it and discover that rather flash necklace that you thought was glass is actually large diamonds and worth £200k. Do you go back, I dont know if you can redo the calculations. Or you find out granny slipped her favourite grandchild £50k for a house deposit, the account was closed and you knew nothing about it, would you be in trouble for giving false informatio. Don't think I'll volunteer to be the executor.