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.

Perfectly reasonable for someone who has tens of thousands spare every year.

That’s what Rachel from accounts thinks will happen when farms are passed down.

In most cases though, there is no other option but to sell the asset and pay off the IHT.

I often wonder if HMRC watch Antiques Roadshow as these sort of scenarios crop up all the time.
🤣

It's why the system is unworkable in it's current form - lots of areas of tax are so complicated that they're completely pointless.

We really could do with scrapping IHT as it stands and start afresh with a much lower threshold, different tax rates according to estate size, and none of these exemptions. Why not start with a threshold of say £100k and a tax rate of 10%, then say 20% over £500k. Make it simple and keep it simple.

It's having such a high 40% rate that causes people to take planning/avoidance actions. If you have a low rate then people won't find it worth the time, money and hassle to do so much tax avoidance planning.

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.

But how would they apply this retrospectively? If your parent helped you with a large house deposit 10 years ago before the new legislation on lifetime gift allowance was applied, and then they go on to die in 30 years, you would have to pay inheritance tax on the value of your own house as the deposit given 40 years ago was over the gift threshold? Or inheritance tax on the uni fees your parent paid for when you were 18?

I tell my clients to keep such records as part of will/IHT planning consultations. If someone "cares" enough about their beneficiaries to write a will and/or take professional IHT advice, then they're the kind of people who ARE going to keep adequate records, bank statements, etc to HELP their family/beneficiaries deal with their estate as quickly and hassle free as possible. It is important to remember that keeping records will also help the executor/beneficiaries to prove that no PET transfers were made in case of HMRC investigation - it works both ways, i.e. the deceased should have made notes/kept paperwork to support any large withdrawals etc that weren't gifts to family/friends to guarantee that they won't end up being subject to IHT as non exempt gifts!

Id go for a blanket 10% across the board personally. Treat everyone equally in death
Non idea why some deceased people should be taxed while some aren’t

As everyone always points out on these IHT threads it’s not about taxing the living.

apologies that was meant to be for @taxguru re their post on changing the tax levels

You're assuming the Treasury and HMRC have actually thought through the proposals to check that they're workable and practical. Given some of the utterly baffling and out right stupid tax rule changes over the past 30 years or, that's a flawed assumption as the so-called governmental experts havn't a clue what they're doing and seem to make up policies on the hoof without giving more than 30 seconds thought to how they work in practice, how they could be checked/policed, nor the entirely foreseeable "unforeseen" consequences.

@AllTheGinghams

No idea. I think as a 1st step they will extend 7 years rule to something ridiculous, 10, 14, whatever.

Personal cap on gifts receipts might start from e.g. 1st Nov. They wouldn't be looking back I think, it's almost impossible to implement.

Whatever shape or form this will take, if it's implemented the consequences both for economy and society will be huge. Desire to support own children and give them better life is one of the strongest human instincts. You take away this opportunity and there is no more motivation to make an effort.

I must admit I am also starting to think along those lines, but I'd still like some kind of threshold, maybe £100k, maybe less, to avoid HMRC and the probate office being swamped by huge numbers of tiny estates where the costs of additional staffing, equipment, buildings, etc to accommodate the extra staff, simply wouldn't be worth the effort.

I like the way that banks have their own lower limits where they'll give the bank account monies from deceased account holders straight to the surviving spouse or beneficiary as per will without probate if the bank balance is low enough. HMRC could work on a similar principle.

Or even, HMRC could take a percentage of all bank accounts that are closed/transferred upon death of the account holder - very simple, just make the banks pay the 10% to HMRC and 90% to the executor or beneficiary.

I'd far rather see sweeping changes to IHT rather than the constant tinkering around the edges that recent governments love, but which never actually change anything and just cause added workloads, inefficiency etc.

Word of wisdom.

Who could've thought that IHT on non-doms will drive them away? now RR is considering to reverse it. Of course it won't be presented to public in Oct but buried somewhere is small font at the bottom of page 239 of the big and beautiful budget

Agree
Lots of parents help their kids get on the property ladder. I can see this sort of proposal re a cap on amount you can gift impacting the young severely.

RR needs to get on mumsnet. It was predicted here often enough

That is so rude. She is a dear friend and I was trying to support her after the death of her parents. She was dealing with everything on her own and telling me, over a coffee, the various processes she needed to do. He father died slowly and painfully from cancer and within days her mother had a massive stroke. It was a distressing and difficult time.

Most recent Chancellors have been equally clueless, going right back to Gordon who didn't think that reducing tax (in fact introducing a 0% tax rate) only for small limited companies, would mean that lots of sole traders would convert to limited companies! Anyone with even half a brain would know that's exactly what would happen, and it's exactly what did happen. His paymaster general, Dawn Primarolo, actually stood in Parliament and said she didn't think sole traders would convert to limited companies "just to save tax"!

Utterly clueless and deluded!

Then of course, once hundreds of thousands of new small limited companies were created, they changed the narrative to it being "tax avoidance" and started attacking such people as if they were doing something wrong, but in fact they were just taking advantage, legally, of tax rule/law changes. (It's more complicated than that as there were other factors too, such as CGT exemptions and tax relief on goodwill, which they didn't think through either, and again cried "foul" when people took advantage!).

Don’t be so obtuse, it’s perfectly clear what the poster means; having to take loans and deal with another layer of admin when you are dealing with grief is clearly upsetting and no doubt she expressed this to friends and family.

duplicate post

Agree with that simple bank transfer idea. Along with an automatic charge on property so at point of sale HMRC get their money automatically
It wouldn't pick up on everything but the system doesnt now either

If granny has a lot of gold and precious stone jewellery for example, and passes it on to her granddaughters over the years, there is no record. HMRC doesn't know what she has, and executors are not privvy to what was given away.

Thats a bit harsh!

It was 0 for the first 10k only, and setting up a limited company costs, certainly need a decent accountant for the 2 sets of director accounts required, thats what the Pay Maser General meant - i know about this as i was engaged to an accountant at the time, working at HMRC.

He tried to help small business, they took the piss, he shut it down inside 2 years.

Sometimes chancellors, esp Labour ones, can never win.

How funny:

Pictet bankers’ move to Italy sparks fierce Swiss tax debate

The departure to Italy of former executives at Pictet, one of Switzerland’s oldest private banks, has ignited a fierce national debate over tax, competitiveness and fairness.

The relocations also come ahead of a Swiss referendum in November on whether to impose a 50 per cent inheritance tax on assets above SFr50mn — a proposal by leftwing politicians that has pushed some wealthy individuals to move abroad.

For info - 50mn SFr is £45.5m and they are fleeing even before referendum. We have 40% here on assets above £0.5m and Labour believe it's not enough

A sliding scale of IHT in Switzerland is payable from 1 SFr and CGT payable on property sales gain, 40% at gains over 400k, so if these people are selling up, they ll pay one way or another or they never really were tax resident in Switzerland.

So its not as simple as you make out & Switzerland has huge inflows of capital atm.

Paywall so don't know what the full story is.

On gain! not inheritance, gain!

40% on gain from Sfr 400k means approx £390k. There is no IHT though until they sell.

We pay 24-32% from everything above 3k.

If he genuinely wanted to help small businesses, why didn't he also provide the zero rate tax band to sole traders, i.e. the smallest of businesses most likely to benefit from a zero rate band? The reality is that he (and his advisors) didn't understand the smallest of businesses and probably forgot that sole traders even existed, and certainly didn't understand the taxation of small limited companies, the tax relief on inherent goodwill, the CGT relief available on incorporation of a sole trader, etc., hence why they cried "foul" when people actually used the reliefs/exemptions available to them!

And you can't say the small businesses were "taking the piss" when they were doing exactly what Gordon allowed them to do! Who wouldn't? Gordon and his advisors should have foreseen the stampede as it was entirely foreseeable. Using tax reliefs/allowances to your own advantage isn't "taking the piss" - isn't what any sane person would do!

18-28% for cgtax over £3k

So many assumptions and so little fact. I am not dodging anything and I don’t “sneer” at anyone, the only person sneering is you.
And, the difference in your scenario is, it wasn’t money YOU had earned. You were being gifted it, glad to receive it. For those of us who have outright earned it and paid massive amounts of tax on it, and then want to gift it to our children, it sticks in the craw that it should be taxed, again. Surely, this is not difficult to understand?