Inheirtance tax of 10%

[PropertyD]

Whilst I think Burnham is not going to be the answer to anything really I have heard that he is thinking of scrapping inheirtance tax and just putting 10% on everyone’s estate. I don’t think this is bad idea at all.

The very rich don’t pay very much if anything and clearly 10% on a £100k estate is not a huge amount and it just seems fairer if this happens. No 7 year rule, no trusts, no complicated set ups.

Anyone think it’s really going to happen?

How much will it really raise?

I would love that but it doesn't sound very Labour

I'll be very surprised if this happens.

I agree that if the rate is more reasonable there is far less incentive to bother legally avoiding. 40 per cent is far too high. I think there could be a problem if it forces those with estates at the lower end to have to sell to pay the tax whereas now there is none payable. Perhaps this could be got round by having an exempt band of £325k lol.
I suspect with Burnham the 10 per cent will be higher for larger estates and that being the case we will be back to people using legal avoidance measures.
In summary I would not seek to avoid a 10 per cent tax whereas the thought of 40per cent incenses me.

No 7 year rule

So someone can give everything away on their death bed? Or am I reading that wrong?

Speaking selfishly, as the daughter of someone who’s made no effort at all to be tax efficient, this would cheer me up no end! He’d cross the road to pick up a penny, and has deep pockets and short arms. Costs his grandkids money to visit him, basically. He’ll die very rich, and save me a lot of money just by not needing me to do things for him a lot!
I’d make a hefty, cheerful donation to charity if this came in.

I think it's a good idea and it would be politically do-able if it were coupled with nationalising care

There would probably need to be a low minimum amount or else it could create unnecessary form filling for people that only leave enough for a funeral

The opposite, I think- everything you give away would be within your estate even if 7 years have passed. Sounds impractical.

I think it’s more that people wouldn’t take avoidant measures years ahead if it was 10%. The rules would still be there, but people wouldn’t be jumping though hoops to avoid them.

I think it's a brilliant idea and have suggested it many times on MN. It would destroy the IHT tax avoidance industry/trusts etc in an instant as it wouldn't be worth people paying huge amounts to save a relatively small amount of tax.

IHT planning was very busy last year with Reeve's stupid changes which often meant HMRC would get less rather than more as people took evasive action to reduce/avoid IHT where previously the amounts were relatively small and not worth paying for IHT planning measures.

A low rate of something like 10% on everything is hardly worth bothering about when it comes to doing fancy tricks with wills, trusts, offshore investments, artificially buying business assets, etc.

Just what we need. Though I doubt Burnham will do it. It doesn't play into Labour's politics of envy, hate and spite as "ordinary" people would have to pay a bit of tax, and the media will label it as a tax reducer for the "rich" (which it isn't!).

You could have a de-minimis limit of say £5k to avoid that.

The devil is always in the detail with IHT. Immediate questions: would you retain tax-free transfer between spouses? Would you start from a very low base? How low?

I think it's a good proposal, which probably means nothing will happen. If it was payable on any estate worth more than £10,000 and the proceeds were directed into better social care funding, it would knock a sizeable hole in the tax avoidance industry.

Sorry, I meant that currently you can give away large chunks of money and providing you live 7 years it’s not counted as part of your estate. Of course you need to know when you are going to pass…

Agreed. In our case 40% would be due on money that’s already been taxed. If the rules don’t change we’re young enough to move our lives elsewhere knowing we’ll be making our kids’ lives easier.

It is a tax reducer for the rich - my estate would pay less as under the current system I lose the residence nil rate banding.

In that case, fill your boots.

All inheritance is unearned and a horrible kind of 'luck'. The country needs money so whatever brings in more with the least pain. And inheritance tax is very little pain.

I agree. It’s not very Labour though.

That's the point that "normal" people pay something. The more people liable to a tax, the more revenue raised.

"Rich" people don't pay IHT anyway - they either move abroad or set up trusts and other tax avoidance schemes.

IHT raises remarkably little tax at the moment, so it's kind of a pointless tax. Only £8.5 billion was raised out £1,232 billion so less than 1% of total tax revenue.

That's what happens when you have a cliff edge along with a huge percentage - it encourages people to take action to avoid it.

A much lower rate spread over huge numbers of people will bring in far more tax revenue and there'll be little point in spending thousands in professional fees to avoid it!!

It hardly matters if it reduces tax for the rich, most of whom go to vast lengths to avoid paying anything via tax lawyers and international accountants. If you make the % smaller, there's less incentive to avoid paying it.

RR's first budget changed so much on the IHT front that it spurred us into taking our tax-free lump sum when we didn't need the money and giving it to our DC.

Labour have run out of living people to fleece, so now they are after the dead's money

That would suit me. The wealthier folk set up trusts to avoid paying anything.

I don't see how the 7 year rule can go though as no one will have a record of all their gifts throughout life. It is our money to spend and gift as we see fit. You need some kind of cut off point which probably can't be on your deathbed. So you keep the 7 year rule but charge only 10 per cent on the residual estate. You would also still need to keep no IHT between spouses upon death or people would struggle to pay the tax if a house they still lived in was the main asset.
With Burnham the devil is in the detail and people like poster above who are anti inheritance would do better to go and live in North Korea. Private property passed down the generations does not belong to the Government in my book.

Yes this is true, if all someone leaves is their funeral insurance plan or the small sum they've saved specifically so as not to leave their children in debt for the funeral which won't leave anything left over!

Even a 10k exemption would work for that though.

They won't wait until people are dead, though, will they? Next, a wealth tax that everyone pays even on the equity in their main home.

Modern IHT was introduced by the conservatives in the 1980s.