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?

How quickly could this change come into force?

What do you mean the very rich don’t pay much at all? I guess not ‘very rich’ but when a friend parent died they paid over £4m in inheritance tax. The estate was worth about £9m and most wrapped up in property so hard to liquidate in the required six months. They ended up auctioning a lot of art to try and make interim payment.
It that aside, are exemptions scrapped to (spouses inheriting house, the £350k exemption)? It is arguable whether a 10% across all would raise the same as the current structure, but getting rid of exemptions will certainly cause issues for many.

This really wouldn't work
My colleague's father has already put one of three houses he owns into her name and one into her siblings', retaining the house with the lowest valuation in his own name, without even denying it's to avoid inheritance tax. If you get rid of the seven year rule anyone who knows they have a terminal illness or age related heart failure will obviously do that with impunity - including very wealthy people with multiple expensive properties.

This would affect the already "squeezed middle" not those with large estates.

But it replaced capital transfer tax which had been introduced by Labour in 1975.

Sounds like they left it to late to do any IHT planning. An estate of £9m would well have been worth getting the IHT experts to change wills/ownership and/or set up trusts to avoid paying £4m.

Will the royal family still be exempt?

I agree. Someone didn’t do any estate planning.

And the liberals before that in the nineteenth century.
my point is that the party is irrelevant: taxing estates has been around for a long time and it’s hardly a new idea from labour to fleece people.

Does it really affect the squeezed middle more than other groups? Receiving an inheritance is not a given and if i am the beneficiary of a £100k estate, tax of £10k is paid I receive £90k.

Sounds quite sensible but I don't have an issue with IHT anyway. My main beefs with IHT is that you have to pay it before you get the money from the estate, which is bonkers. And that there are no allowances for someone dying suddenly when they are relatively young.

Someone in their 80s has time to plan and give away money earlier. Someone in their 40s with a family doesn't (assuming accident or short term illness) but as far as I know there are no allowances for that.

IHT is very newsworthy but fiscally irrelevant for the country and for most people. It raises only 0.5% of the UK's total tax take and the vast majority of people don't pay it. For a married couple with a house, the 2nd spouse to die will only pay it on assets above £1m. Given that a few years in a care home will cost you £70k+ per annum per person, even moderately well off people are unlikely to have an estate worth of £1m+ when they die.

Given this I always find it surprising how worked up the right wing press get about IHT. I think it plays well with people who think that the left wing are out to take everyone's hard earned money. (Not true by the way, total tax as a percentage of GDP rose to their highest levels under the Tories, even for the very rich, VAT rising 20% under Osborne was extremely significant)

Taxes aren't really about raising money that the government can then spend - that's not how an economy works, the government has to spend money to put money into the economy first, then most of it comes back via taxes. Taxes are principally a way of encouraging or discouraging certain behaviours. Think cigarette and fuel duty. Progressive income tax rates are a way of encouraging poorer people to work and be productive, but stopping too much wealth concentration at the top (rich people actually spend a smaller proportion of their wealth, cash in the bank isn't good for the economy).

So with IHT you actually want wealthy older people to not hoard their wealth. Piles of cash in the bank are bad for the economy it should be out in the economy cycling round. An elderly couple in a huge house blocks a house that could be better used by a younger bigger family.

So actually I think the current regime with quite a high rate is OK. If it encourages people to trade down their property, give some of their wealth to their kids when it's most useful, buy an annuity that is in turn invested in companies, then it's achieving the right aims..

Of course you'll never get a proper discussion like this, politics and the media has largely been reduced to sound bites. Read the FT or The Economist if you want to understand stuff like this in detail.

If they had £9 million they had ample time to give some away and still keep enough for possible care fees.

IHT is a tax on hoarding. Don't hoard, and you'll pay much less.

There would be a huge administrative burden attached to a 10% charge on everything. Sounds like a disastrous idea

The person who dies in their 40s with a family would presumably leave their estate to their spouse or partner, which under the current rules is a tax-free transfer.

Indeed! HMCTS were struggling to cope when my dm died in 2024: they would not answer any queries unless you had been waiting more than 16 weeks since application. Complete shambles.

Surely this is exactly what shouldn't be possible!

I'm absolutely not against 10% or more inheritance tax where the inheritance is going to independent adults (or children not dependent on the deceased).

Obviously exemptions need to remain for spouse/ partner and dependent children resident at the same address as the deceased though! Otherwise there'll be lots of families out on the street needing rehousing!

Also the tax (at least on primary residence and lower value estates) needs to be payable from the estate not up front. Many, many people who are left 50% of their parents' house won't be able to find 10% of the value to pay before the house is sold - that money should be paid, I have no problem with that or indeed a 25% tax in that situation provided the heir isn't a dependent child or spouse, but from the sale.

Or maybe £15k as at the moment you don't need probate for estates under that in a lot of cases?

I think it is a good idea, but only if all loopholes to minimise IHT are firmly closed.

This would be a brilliant and fair policy, which means there's zero chance Labour will bring it in

Only 5% of estates are currently liable to pay inheritance tax given the allowance plus nil rate residence band, this measure would make 95% of people worse off.

I get the impression that either a lot of people are unduly worried about a scary 40% number that won't actually affect them, or the 5% who are affected are very vocal or able to make this a popular talking point.

So similar to the overseas aid budget which Reform types can't stop being obsessed with?

Negligible or not negligible?

Obviously tax dodging by international companies is a vastly bigger source of lost tax income, which is never targeted meaningfully.

@UlyssesandThatBookYourAuntieWrote International companies are not, by definition, registered in the UK. They pay their taxes in other jurisdictions.

Quite. It does seem fairer but I guess it will cut some industries stone dead. As you say though - it’s unlikely to happen although Burnham needs to do something eye catching and bold.

That and getting rid of that Rochdale gang leader but realistically it will be months, many appeals and he still won’t get booted out. There is also the possibility he could die .

I assume that there would be anti-avoidance laws to stop this like there are for other taxes.

Brilliant idea. It would stop a lot of people leaving the UK to avoid IHT.

The lower the tax rate, the higher the revenue as it is not worth trying to avoid.