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?

That's what should happen though - grandma's grandchildren can all have a deposit for their own house and at least 10% back in the tax pot.

Actually perhaps the increase in value should be taxed as a capital gain if inherited by anyone but her spouse... After all it is not merely a capital gain, just a pure windfall for the inheritors.

This is disingenuous because it's rarely what happens. Generally, unless parents die prematurely, the money goes to "children" in their 50s and a token amount (maybe enough to buy a used car or go interailing) to grandchildren.

If parents really wanted to set their children up they'd downsize right down to a small "future proof" two bed when the youngest child finishes whatever full time education they have chosen, and use the capitol released to give each child a deposit for a first flat.

Obviously nobody actually wants to do that and 95% exercise their right to rattle around a big house, possibly telling people that they need it so they can host Christmas.

Labour = levellers

if there is more than one beneficiary house would be sold anyway to distribute the estate so no change in the process.
Although it does have all the makings of a daily mail sob story …

The other thing we could do is tax the beneficiaries not the estate. That’s how it works in Germany.@UlyssesandThatBookYourAuntieWrote

Either everyone pays or no one pays. People have already paid tax through PAYE, VAT, stamp duty, tax on pensions.

Social care is a societal need not a luxury so everyone needs to pay into it.

Any more taxation and we’ll lose jobs and those earning more because they are not seeing any benefit from the contributions being made.

Or skip a generation: either when the will is drawn up or through deed of variation.
dh’s uncle skipped a generation and sole beneficiary was a 22 year old without a property which was an absolute boon for him.

I agree to a point. But many taxes aren't to encourage or discourage behaviour, they're just a way to raise revenue. For example stamp duty.

There's a whole discussion about whether taxes fund expenditure or vice versa and particularly which one comes first (the answer is government spend). Also to what extent we actually need to balance tax and spend (the answer is less than the right wing, or the current neoliberal Labour party would have you believe).

However even if you do believe that taxes and expenditure should roughly balance, IHT is insignificant, it represents around 0.5% of the total tax take, and almost nobody pays it. Which as I said before makes it bizarre that everyone gets so wound up by it. Unless you're anticipating having an estate of £1.5m or more the amounts involved are either zero, or relatively little (on a £1.5m estate your beneficiaries would still receive £1.3m which I imagine would make them pretty happy).

A few people do this, but most don't either because it feels unfair if the middle aged "children" never inherited anything substantial from their own grandparents' generation, or because they don't change their wills in the last 20+ years of their lives, or because they use inheritance as a threat/ bribe over their children.

Skipping a generation would legitimise the argument about giving the young a step up, but that's still no reason it shouldn't be taxed! That windfall was just an unearned stroke of luck for the young man and he absolutely shouldn't complain about paying 10% - or even to be honest 40% tax on money that quite literally fell into his lap without him exerting the slightest effort. He'd still have 60% of something he did nothing to earn!

Does that mean the estate is sold and the beneficiary declares the entire inheritance as income?

What happens if one person inherits a house - do they pay nothing or is something triggered (perhaps by registering the transfer of ownership) forcing a valuation so the windfall can be taxed?

It sounds as though it might be fair but it depends how it works - it wouldn't be if the inheritor of a very high value property could avoid tax by not selling it and moving in/ renting it out/ leaving it empty.

Because the uncle in this scenario died without any direct descendants 40% IHT was paid (no residence nil rate banding). Nevertheless a fabulous (and completely unexpected) windfall for a 22 year old.

I believe the tax free allowances depend on your relationship to the deceased and then different tax rates depending on the amount received after your allowance has been deducted.

Taxing rich dead people always seemed to be a better strategy than raising that money from poor living people

Well quite.

The only arguments against it seem to be rather Veruca Salt style foit stamping "but I don't want my heir to pay tax!" or nonsense about already having paid tax, when obviously all money is taxed again and again - get your net income, use it to buy some shopping, pay VAT, use it to buy a house, pay stamp duty.

Why would inheritance be an exception? There is no reason except the foot stamping "I want this to be an exception and should get my way even though I'll be dead because I'm special!"

As a tax adviser I think the opposite would be true, more planning work would be done if more were to be caught. As it is just now, about 5% of estates lay tax and a couple can die with up to £1m of assets without paying tax. With a proposed 10% flat rate they’re suddenly paying £100k of tax on death.

Sounds no worse than the UK, but I don't think being the deceased's independent middle aged offspring or not financially dependent on the deceased grandchild or nephew/ niece/ sibling etc should get you out of paying tax on a large inheritance.

Trusts don’t “avoid” IHT though - if they did they would have been stopped long ago.

They can help mitigate or avoid IHT depending on the type of trust as long as you survive 7 years.

Labour = levelling down not levelling up

The stupid comment I was referring to was that someone with a £9m estate is a hoarder. That is a stupid comment.

Oh yes - given tax was duly paid, lucky him, I'm sure it made a huge difference! It doesn't change the fact that it's no more deserved by him than the next 22 year old on the bus, but life isn't fair and it's no different to a lottery win.

They can mitigate IHT - that’s not tax avoidance. Trusts are set up for many reasons, it’s not always tax driven.

Let me be the first person to say that I am working out all my various options to ensure that the estate DH and I have created through work alone is transferred as tax-efficiently as possible to our children. We inherited very little, and passed what we did receive down a generation by DoV, to our DC who is just buying a modest 2-up 2-down Victorian cottage in a Midland City. As we have money saved, we shall pay for the fridge, freezer, washing machine and dishwasher. It works for us. When we sell our family house, we'll live in it while we wait for the house we want.

And a comfortable bed. That's the top priority!