Does anyone think that the Tory plans to increase inheritance tax are a good idea?

[morningpaper]

Just curious really.

Apparently the rate is actually £2 million for couples (e.g. 1 million each).

Particularly if the wealthy can pay £8k at retirement in order to ensure that they won't have to sell their house to fund any residential care (I do think that anyone who can easily do that is reasonably wealthy).

This means that more LIVING people will have to pay tax because we aren't taxing the dead anymore.

Why IS this such a popular idea? I don't understand.

theyoungvisiter a house passing under a joint tenancy to a non-spouse would still fall into the estate for IHT purposes. Joint tenancy just means it automatically passes on death without the need (or ability) to specify that in a will. Ie if you died intestate and owned the house with a joint tenant the co-owner would inherit, but unless they were a spouse they would still need to pay IHT.

apols yes sorry that was a red herring. Was confusing myself with intestacy.

However, there are vast chunks of money which aren't taxed (again, if you order your affairs sensibly).

Any insurance policy which pays out directly to the beneficiary doesn't qualify for IH. Pension lump sums paid out on death to a named beneficiary don't qualify. Moneys put into certain trusts (if you survive 7 years from the setting up of the trust) don't qualify.

It's hardly a Dickensian workhouse situation for the children of the middle classes.

Don't the super-rich bung their surplus cash into family trusts and avoid inheritance tax? I'm rather in favour of inheritance tax except that our governments have messed up our pensions and I am rather hoping to be able to top my meagre pension with some money inherited from my family.

Dickensian, maybe not. But it's a fair concern that my modest house which just happens to be in a high-cost housing area stays as my children's property, not the chancellor's.

But obviously as we're 'middle class' we're fair game. Again.

The trouble with inheritance tax is that it really only affects middle income families.

The poor don't pay it. The uber-wealthy can ensure that they don't pay it, by careful and judicious trust-planning.

So really only hard-working families actually pay it. The sort who work hard all their lives, have most of their money in their house and maybe a few savings but because houses are so expensive nowadays.

I think inheritance tax is absurd. Penalises the thrifty.

oh, it's the old 'hard-working' stuff again. Silly me, forgot that anyone in possession of more than £650k must by definition be hard-working and and worthy of sympathy than anyone who has less.

Clearly, if you have less than £650k to leave, you are a slacker who really should being trying harder...

Yes. I think raising the inheritance tax threshold is a good idea

I think you are not addressing the point that I am making Edam, which is that a tax which affects people who leave more than £650k (the price of a three bedroom terrace in London) but doesn't really affect people who leave substantially greater sums (providing they do the proper planning, and many do) cannot be a reasonable tax.

Well that's an argument for abandoning taxation entirely, given that the rich will always be able to afford expert advice about exploiting loopholes.

Or it's an argument for closing the loopholes. Does government not employ people who used to do tax planning for the rich, so they can second guess what the beggars are going to get up to next?

Either way, it is definitely not reasonable that people who have far less than £650k (which is most of the population) have to pay higher taxes to subsidise those who do.

As for 3-bed terrace, I think you'll find there are plenty of people in London who do not own any property, or own property worth far less than £650k. Someone posted average property prices further down the thread.

There are two bedroom flats in Mayfair - doesn't mean said owners of 2-bed flats are particularly hard done-by or deserving of support from taxpayers.

or, rather, that ordinary people have to subsidise people who stand to inherit £650k (or £325k depending on whether it was from a married couple). Anyone who has £650k is entirely free to enjoy it as long as they pay their taxes. Anyone who gets more than £650k free gratis and for nothing should be ruddy grateful that they only have to pay tax on a tiny proportion of their gains!

average house price in Greater London was £260,764 back in May this year.

Not £650k, or even £325k.

I'm not sure inheritance tax is a tax on the wealthy - it's a tax on the not-wealthy-enough to afford tax schemes.

And most of the schemes - particularly income tax or capital tax are being closed down. It's really only IHT that needs reforming. Or abolishing and something better being thought up - wealth or net worth taxes for instance.

Both of my parents have died and I have paid mu fair share on inheritance tax already, before the limit was doubled as well .

I have mixed views on it. On the one hand, I am increasingly annoyed that the super wealthy just avoid it all anyway by complicated trusts etc, whereas people who have less (although still a lot, fair enough) don't plan and are the ones who bear the brunt of the taxation. It's the loopholes I object to, not the tax.

On the other hand, I have paid 40% on the money I have earned so I really don't see why I shouldn't pay 40% on money that I haven't.

Whichever way you look at it, the people who have worked hard all their lives to earn it are etc are dead, and therefore not the ones being taxed.

exactly, fruitstick, especially your last line!

Quattro - do you know if HM Treasury or Revenue & Customs test out any changes in tax policy to see whether they can be got around by rich geezers who can afford tax planning?

Seems to me it's a very complicated game but one that is worth playing, to stay one step ahead of tax advisers to the wealthy!

"Property Tax" is most regressive. A poor person with no property (other than clothes on back) is forced to pay more than 1000% in Property Tax (council tax). But owners of property over £10,000,000 pay less than 1% - sometimes even zero ref-05

A person with any logic, using only public domain, can determine for instance that both NICs are taken from one source - an employee's payroll earnings. NICs thus constitute an additional 22% of Income Tax taken from Gross Earnings (as was publicly admitted by John Major) ... payable in full on earnings less than £30,000. So [majority] have gross income taxed at rate of 44 - 45% ref-01

But highly paid politicians, mandarins or media men on £300,000 pay only 1% - shortly to be 2% - NIC tax. Additionally they can protect much income from ...direct tax.

taken from here

this situation has got worse since this was writen. NIC is was of the most unfair taxes as it stops at around 40k?

I would like to see the threshold rise to at least 100k

The thing about tax, is that it's a game, rather like scrabble. Everyone is supposed to play by the rules. HMRC write the rules, and then tax planners work out how (legitimately - ie within the letter of the law) to avoid as much tax as possible for their clients.

So when the press talk about loopholes, it always bemuses me rather. There are so many legitimate ways of avoiding so many taxes. There are very few loopholes in the sense of errors in drafting, and these are usually quickly corrected. What happens is that some ingenious soul will think up a structure that complies with the rules but saves people some tax.

One of the best bits of legislation introduced was the tax disclosure regime - which means that fancy-pants planning schemes have to be notified up front to HMRC who act pretty quickly to clamp down on the abusive schemes or where there is a risk of substantial loss to the exchequer.

So all the NIC avoidance schemes - being paid in gold bullion or coins or whatever - have all been clamped down on. Income tax avoidance schemes are rare. Very rare.

So its really IHT that needs a radical overhaul IMO. Because I truly believe it is unfair. But I don't believe that this is what Cameron is suggesting. He's just suggesting a tax cut for the middle income types as a populist measure.

Hello, new to this!

Just in my own personal view, isn?t the point that tax has already been paid on this money the overriding factor?

I find it a disgrace that people who have worked hard all their lives and want to pass a helping hand on to their kids, get penalised for doing so. Is there nothing that they will not touch or leave as our own?

The BBC's average house price includes flats

Yes, and the general population includes people who live in flats as well as houses.

Clancy, we all pay tax more than once. You pay every time you earn money and every time you spend it. You pay tax on your income, on any money you save out of that income, you pay VAT and customs or petrol duty etc. etc. etc. IHT isn't unique.

And no-one is being penalised. The people who 'work hard all their lives' don't pay inheritance tax, their beneficiaries do. Just like everyone else pays tax every time they receive or spend money.

Since most people's money is in their house, and since most houses have doubled or tripled in value since the 90s without anyone paying any tax on the gains, no, most people haven't already paid tax on most of the money.

If we paid capital gains tax on property when we sold it, that would be different. But since we don't...

The people who got New Labour into government in 1997 were the 'middle classes'. They have since abandoned New Labour. These are the people the Tories are trying to attract with the inheritance tax, not the Old Etonians who never abandoned them and who always have means of passing down estates in Trusts etc and avoid inheritance tax anyway.

The threshold for IHT is £235,000 so that affects almost everyone who has a house, even a flat, in major cities. There are ordinary couples, say teachers and nurses who happened to buy their home a few decades ago, having paid tax on the deposit etc, whose home is now over that threshold. Their children would probably have to sell the home to pay the IHT.
Last year there was a dustman living in a council house who inherited his mums house but didn't have the means to pay the IHT so had to sell it. This affects far too many ordinary people. The threshold should be raised imo.