The really rich don't pay inheritance tax

[ninna]

The really rich don't pay inheritance tax. I have heard this many times on the radio. For instance, I remember someone saying that the Queen mother probably wouldn't have paid any.
I gather it's something to do with trust funds but have never heard an explanation of how it's done and why it's allowed.
It has always seemed very unfair to me. The labour party is supposed to be about fairness. I wonder why they haven't done anything about it.
I wonder if anyone can explain what's going on?

you can't leave it, I think it is true

hold on

The correct figures are: public sector spending represents 53 per cent of the economy. Public sector employment represents about 27pc or so of employment.

These are the figures.

Public sector jobs increased by 5 per cent over a year to 6.09 million. In all, the state gained 290,000 employers from September 2008 to Sept 2009. During the same period, private sector jobs fell by 735,000 to 22.82 million.

this is the story that conflates the two so that it looks like 53 pc work for the state

realistically it's more true than it looks though

more later

excuse i had to go, sick child

Yes: so if 53pc of the economy is public sector it means that although people may not actually work in the public sector, their income is dependent on it: eg private building contractors, PR firms, consultants etc etc etc.

The awful thing about the figures is that's 23 million people supporting 70 million people. A fifth of people of working age are "economically inactive".

Anyway here's the link.

much better than the Mail as the figures are more easily read so you can make your own interpretation

Thanks ms, will look into it later (am just about to listen to some drama and won't concentrate properly on either if I try to handle both after 20-something hours awake).

Don't mean to quibble too strongly, but 6/22.8 is not as high as 27% as it is 6/ (6+22.8) = ~ 21% (20.8333_) and before the extra 735k would have been 6.09 / (6.09+23.555) or 20.54%_

All the same, it is rather worrying to see how much depends on the public sector. Seems to me that it is closer to 29.5 m supporting the country's population. Has it reached 70m ?

I also worry about what proportion of the money spent is taken in a fraudulent manner (remembering how different firms got together to 'rig' which would get a contract, and part of the amount the winner received was passed on to the 'losing' firms, while the funds came from local or central government funds, ie from taxpayers, for crooked bosses to line their own pockets).

Sure I was rounding and doing it in my head! I figured 6 m is a quarter of 24m so it's about 27pc of 23 million. It's about 25.52pc with a calculator.

Why is it 29m? Are you counting the public sector workers? Because they are paid for by the 23 million. They don't pay for themselves, they can't possibly. It's private sector money that pays for it all.

No it hasn't hit 70m yet, it's still only about 62m. I collapsed into laziness after hunting for all those other figures.

Wall Street Journal was the source for Dh apparently. I will grab a link after morning mayhem subsides. Thanks for that mmrsceptic. Very helpful

he was nearly right! right in principle i suppose

I still don't understand why everyone seems to accept the fact that laws were made which meant that the rich can set up trust funds which enable them to avoid paying inheritance tax. Middle income people, on the other hand, have to pay it.This is so unfair and unjust!!! I wonder how much money the country loses out on because of this. The same rules should apply to everyone.

How do you qualify rich?

We have a trust set up legitimately to enable as much of our assets to go to our children as possible. It costs very little to administer and set up therefore anyone can do it not just "the rich".

There is a severe shortage of Ferrari's on our drive we don't use net jets and our dc go to state school so we're hardly in the super league.

how did you do that?

We did something with our Will and something with a Financial Advisor. You can tell how much notice I took at the time!

I can ask Dh to give me some more info if you're interested?

yes thanks would be tremendously grateful really! we just made our wills by ourselves without solicitor (abroad) so we need to regularise things

hmm how can we exercise that contact

i think i still have a vaguely anonymous email account

unless you could do it on here? would he mind?

We have done a trust - just to ensure we maximise both dh and my inheritance tax allowance. We did it when we realised that if we both died suddenly our dc's would have to sell the family home to pay the inheritance tax. Our wish would be for them to continue to live in their own home - looked after by a relative. We also had to increase our life insurance (to cover the remaining inheritance tax). We live in a semi - not a mansion (but live in an area with high housing costs).

Imo - inheritance tax hits the younger and Ill prepared rather than the older person who can plan how to minimise it.

Mmrsceptic - I'd advise a soliciter.

This is not a popular view (and probably doesn't sit very well with my left-wing principles!) but I think that where there is a genuine desire to pass a house or other property down through the family as a home to be lived in, rather than an asset, it should be possible to do that with no inheritance tax being payable unless the property is sold. I think that's what a lot of people are trying to achieve through setting up a family trust.

Thanks Jack. That is EXACTLY our situation. Loss of parents compounded by loss of home -- horrific. That's what we want to avoid. I agree with you Bramshott.

ms "They don't pay for themselves, they can't possibly. It's private sector money that pays for it all."

So are you suggesting those working in public sector don't pay any VAT, capital gains tax, stamp duty, NI, income tax (and anything I've missed). Anyone on a payroll with annual P60 printed alongside their regular salary details is paying into the tax system, so part of what is earned by 100% of those in employment goes into the tax system, including money from the public sector workers to "pay for themselves".

Probably some awkward maths could be involved if it wasn't in the low 20s% (because if public vs private numbers went up too much we'd reach a stage where funding would all fall apart).

I do sadly know a family where this happened. My understanding is, that the inland revenue eventually agreed to apply the tax as if the parents had set up trusts, and the dc's stayed in their home. However, it was very stressful and uncertain for them at a time of profound grief.

yes, sure, but they don't pay all their salary over

that's what i mean by "they can't pay for themselves"

what would it be -- they on average pay maybe forty per cent of what they cost?

OK, see where you are coming from, insofar as what taxes are paid from public sector originally came into funding them from private sector. (and why I suggested some awkward maths as an economy entirely dependent on public sector would fail)

Perhaps one reason past communist systems, and the current handling in N Korea, leave most people in poverty and the only real "income" is from tourism or overseas trade. Both being difficult if you close off your borders and/or have few resources to exploit.

agree.. also if you have 53pc of the economy publicly funded it probably makes up for the forty per cent yr public sector employee does pay -- ie all those people who are basically paid by the public sector though not employed by it

How awful jackstar. What a terrible story must be behind that.

jackstarbright/mmrsceptic - I agree with your posts on young children and trusts. When we set up out trusts for our chldren they we age 2 and 4 and both me and DW were or had been every ill. I think it should be automatic on accidental death of parents with very young children that it is not levied.

In fact, I think it is quite barbaric that the HMRC would think it right to ever deprive the grieving children (and elderly relatives) of the money they need to be brought up on.

Hmrc are barbaric, and clueless about their own rules.

Every where I go on MN people are pro inheritance tax so I am surprised to see people here who have set up trusts to avoid it.

I have often thought (rather dim observation coming up) that inheritance tax can be particularly harsh on the agricultural sector, as those often are larger properties, farms, etc that are passed from one generation to the next. People rarely go in to farming, they are usually born into it and I think it is important to protect farming and agriculture as much as possible.

Excuse me if I am bring the tone of the debate down!