Quick question - inheritance tax...

[QuickQuack]

JacquesMesrine said:

I'm putting options out there and there is nothing wrong with avoiding paying tax. I maximise my ISA allowances, pay a lot into my pension scheme and have plenty of other tax breaks on the go. I'm not accusing you of dodging tax, I'm saying how others will portray you for trying to maximise your legitimate tax avoidance approach.

We max out on ISAs as well but at preset with the current rate of various investments, it's more sensible for us to keep all our savings in the offset account because that's effectively earning over 4.5%. We also have large pension contributions but that's about it in terms of tax-free savings and investments. Being portrayed in a bad light when I probably pay more tax than necessary isn't nice. I could probably bugger about with domiciles as I have dual nationality and property abroad, but I don't.

JacquesMesrine said:

The thing about IHT is that it actually doesn't matter. You aren't directly affected, as you're dead. Your partner isn't affected as there's £0 to pay on transfers no matter how big the estate (the same applies if the deaths are in the opposite order). It's only your children, or other beneficiaries, who tend to be affected by a reduced inheritance. However, if everyone got all the money, then the reality is that house price inflation, or other assets would just be more expensive as everyone gets to keep all their money.

Actually, now that I've had a good rant and got it off my chest, you're right on that one, it doesn't really matter. Unless I manage to screw things up royally in the future, my daughter will receive a decent amount and hopefully she and her half-brothers (my two stepsons from my wife's first marriage) will not need to sell the house to pay the IHT. That's more than I have received, any amount above 0 being more than I received (thanks to an ahole stepfather who has cheated my sister and me out of a huge inheritance from both our real father and our mother), so she should be able to fend for herself with that and pay her own way through life, albeit with a bit of a leg-up.

It's bloody good to be able to have a rant after a bad day though!

JacquesMesrine said:

The loss of revenue would have to be made up another way, so that's likely to be a tax whilst you're alive. Personally, I'd rather pay taxes after I'm dead, than while I'm alive and it affects me directly.

Ha ha, that's quite right actually!

[Toltec]

JacquesMesrine said:

Firstly, sorry for your loss and I hope you remember the good times with your parents. I'm assuming that, as there is zero IHT between partners (unless unmarried). However, as you've put this in financial terms then I'm going to have a go at explaining that too.

You are now at most £350k worse off on allowances than the max possible on this. That means a maximum tax bill of £140,000. If that is five years income then that equates to an annual income of £28,000 per year. The challenge here is that if the house is your parents then it's not an entitlement as such and if everyone got their parents hoe,s tax free then there would be more money sloshing around so everything would naturally cost more.

If this is your nphoem with your unmarried partner, then again, my condolences, but there was a simple way to avoid the tax legally and simply.

The former and your sensitivity is appreciated, thank you.

I wouldn't mind so much if the IHT rate was not so high, neither we nor our parents ever earned enough to pay high rate tax so it just feels wrong. Fortunately the liquid assets and our savings are sufficient to prevent us having to sell the house in a hurry and make a further loss. I guess we are fortunate in that respect and I do have sympathy for those that are not only forced to sell their parents home while they are still grieving, but also end up having to pay interest on the owed tax if they cannot pay it in time.

My apologies for jumping at you, having her die just months after they finally announced the changes made it all the more bitter. I'd rather she had had another couple of years and had nothing to leave us.

[QuickQuack]

TwigtheWonderkid said:

The vast majority of people whose estates will attract IHT live in London and the South east. That's a fact.

Sorry old chap, but alas no, that is not a fact. A large proportion, yes. But not majority, let alone vast majority. ONS and HMRC publish the data on number estates paying IHT on a regional basis. Approximately 42% of estates subject to IHT are in London and South East. The data is available here, table 12.10b:

https://www.gov.uk/government/uploads/system/uploa...

Granted, 42% is a large proportion but it's well under half so not a majority, let alone "vast majority."

Anyway, it's too late to argue and I've had a glass of wine. Care to join?

[mph1977]

QuickQuack said:

Sorry old chap, but alas no, that is not a fact. A large proportion, yes. But not majority, let alone vast majority. ONS and HMRC publish the data on number estates paying IHT on a regional basis. Approximately 42% of estates subject to IHT are in London and South East. The data is available here, table 12.10b:

https://www.gov.uk/government/uploads/system/uploa...

Granted, 42% is a large proportion but it's well under half so not a majority, let alone "vast majority."

Anyway, it's too late to argue and I've had a glass of wine. Care to join?

and what;s the population of London and the South east ? 15 million ? ( oft quoted figure of around 8 -9 million in 'greater london )

so 20ish percent of the population pay 40+ % of IHT ....

[JacquesMesrine]

Toltec said:

The former and your sensitivity is appreciated, thank you.

I wouldn't mind so much if the IHT rate was not so high, neither we nor our parents ever earned enough to pay high rate tax so it just feels wrong. Fortunately the liquid assets and our savings are sufficient to prevent us having to sell the house in a hurry and make a further loss. I guess we are fortunate in that respect and I do have sympathy for those that are not only forced to sell their parents home while they are still grieving, but also end up having to pay interest on the owed tax if they cannot pay it in time.

My apologies for jumping at you, having her die just months after they finally announced the changes made it all the more bitter. I'd rather she had had another couple of years and had nothing to leave us.

Obviously remaining sensitive to your situation, with none of you getting near a high rate tax band then the value of your parents' home will mean that, they and you by definition, will have benefited from significant house price inflation.

I live in an area that doesn't see such startling rises and my parents' home won't have rocketed in value. I had to save hard to get deposits together and, whilst younger, my mortgage continued to be a large part of the value of my home for years.

It seems grossly unfair to me that large swathes of the country would inherit large chunks of money from their parents, whilst others with parents in exactly the same earning position inherit little, purely due to the lottery of geographic birth.

Situations like that have led to many with inheritance money to burn heading off to the country to buy a weekend home and pricing locals out of their own housing market.

[RobinOakapple]

Burwood said:

TwigtheWonderkid said:

Burwood said:

And you're ok with that twig? I'm not. Having to sell a family home to pay taxes is repugnant.

Why? In the majority of cases, the kids will be in their 30s/40s/50s and not be living there anyway. They have inherited a family home worth a million plus, that they themselves haven't worked for, which was bought by their parents for a fraction of that price and no tax has ever been paid on the increase in value.

Because it is the most basic human instinct . A private home, no matters it's worth should never attract taxation and there are no guarantees in life what age my kids will be.

If your kids should not have to pay tax on a house they receive despite not having worked for it, why does my builder have to pay tax on the money I pay him when he does have to work for it?

[Jim1556]

Jesus! This thread went a bit nuts...

Anyway,

Burwood said:

Because it is the most basic human instinct . A private home, no matters it's worth should never attract taxation and there are no guarantees in life what age my kids will be.

My problem with IHT is simple, I have worked all my life so far, paid tax on all my earnings, if my estate is worth £1m when I go, I'll want to leave it to my daughter, the government can fk off touching my money as I've already paid the tax! She should absolutely not have to find circa £200k (out of my estate)! I know there are ways of minimising/avoiding liability, but I shouldn't need to!

As for 'it's got to come from somewhere', easy, abolish the House of Lords, trim the foreign aid budget, cap public service wages (there's no way a councillor should earn more than the PM), etc, etc...

[Jim1556]

RobinOakapple said:

If your kids should not have to pay tax on a house they receive despite not having worked for it, why does my builder have to pay tax on the money I pay him when he does have to work for it?

Easy, an inheritance is a gift, in the same way, your builder could receive a gift from you and not pay tax on it (think £1000 in a Christmas card)...

[RobinOakapple]

Jim1556 said:

Jesus! This thread went a bit nuts...

Anyway,

Burwood said:

Because it is the most basic human instinct . A private home, no matters it's worth should never attract taxation and there are no guarantees in life what age my kids will be.

My problem with IHT is simple, I have worked all my life so far, paid tax on all my earnings, if my estate is worth £1m when I go, I'll want to leave it to my daughter, the government can fk off touching my money as I've already paid the tax! She should absolutely not have to find circa £200k (out of my estate)! I know there are ways of minimising/avoiding liability, but I shouldn't need to!

You may have paid tax on it, but your daughter hasn't. All the money you pay to anybody has already had tax paid on it, when it transfers to someone else they have to pay tax on it too. That's how tax works.

[Jim1556]

RobinOakapple said:

You may have paid tax on it, but your daughter hasn't. All the money you pay to anybody has already had tax paid on it, when it transfers to someone else they have to pay tax on it too. That's how tax works.

As I said, an inheritance is a gift! Completely different to earnings!

[TwigtheWonderkid]

Burwood said:

TwigtheWonderkid said:

Burwood said:

And you're ok with that twig? I'm not. Having to sell a family home to pay taxes is repugnant.

Why? In the majority of cases, the kids will be in their 30s/40s/50s and not be living there anyway. They have inherited a family home worth a million plus, that they themselves haven't worked for, which was bought by their parents for a fraction of that price and no tax has ever been paid on the increase in value.

Because it is the most basic human instinct . A private home, no matters it's worth should never attract taxation and there are no guarantees in life what age my kids will be.

It's a basic human instinct to provide shelter for yourself and your family. I'm not sure it's a basic human instinct to have to live in a house worth over £650K (increasing to £1m in a few years) and get to pass that money tax free on to your kids (who in most cases will be grown adults).

I think your comments makes more sense if you were saying there should be no VAT on home repairs or improvements.

[Jasandjules]

Twig, why do you suggest IHT is a fair tax?

[RobinOakapple]

Jim1556 said:

RobinOakapple said:

You may have paid tax on it, but your daughter hasn't. All the money you pay to anybody has already had tax paid on it, when it transfers to someone else they have to pay tax on it too. That's how tax works.

As I said, an inheritance is a gift! Completely different to earnings!

Yes, but your point was that you it shouldn't attract tax because you had already paid tax on it, not because it was a gift...

Jim1556 said:

My problem with IHT is simple, I have worked all my life so far, paid tax on all my earnings, if my estate is worth £1m when I go, I'll want to leave it to my daughter, the government can fk off touching my money as I've already paid the tax!

[TwigtheWonderkid]

Jasandjules said:

Twig, why do you suggest IHT is a fair tax?

For all the reasons I've already highlighted. The people receiving the money it have done nothing to earn it. The people leaving it will (in the most part) have benefitted from house price inflation on which no tax has ever been paid. You're going to get £650K tax free anyway (soon to be £1M) which isn't exactly loose change. I really cannot get worked up about it.

If my roof needs replacing, I have to pay VAT on the work. And the money I'm spending has, unlike house price inflation, already been taxed. That's far more unfair. Food is vat free. Why not the roof over your head. Are they both not necessities.

[Jim1556]

RobinOakapple said:

Not sure what's going on with the quoting system???

Let's not argue about semantics - the point is, I want to gift my assets when I die, not give a large % to HMRC who'll piss it up the wall!

It is absolutely NOT a fair tax, my daughter didn't earn it, but I did, and paid a fair amount of tax on it! (I don't believe 40+% is fair but that's another thread)...

[Craigyp79]

Jim1556 said:

My problem with IHT is simple, I have worked all my life so far, paid tax on all my earnings, if my estate is worth £1m when I go, I'll want to leave it to my daughter, the government can fk off touching my money as I've already paid the tax! She should absolutely not have to find circa £200k (out of my estate)! I know there are ways of minimising/avoiding liability, but I shouldn't need to!

As for 'it's got to come from somewhere', easy, abolish the House of Lords, trim the foreign aid budget, cap public service wages (there's no way a councillor should earn more than the PM), etc, etc...

There are people out there that have worked all their life, possible even harder than you, earning minimum wage and struggling to get by from day to day. They will never have anything to pass on to their children. These are the people that need the support of society, and the higher burden unfortunately rests on the people that have more money than others.

This is the society that you choose to live in and profit from, it is and never will be totally fair and the government should be working hard to try and make it fairer, unfortunately politicians seem to have forgot that this is there reason for being (if it ever was such..)

If you spend a large amount on supporting charities or volunteering for support groups then I do sympathise that you feel your daughter will be hard done by.

But if you are sitting there with a massive sense of entitlement looking down on those that don't and never will have the opportunities afforded to you, then you deserve all the tax you get.

Edited by Craigyp79 on Wednesday 3rd February 11:01

[RobinOakapple]

Jim1556 said:

Not sure what's going on with the quoting system???

Let's not argue about semantics - the point is, I want to gift my assets when I die, not give a large % to HMRC who'll piss it up the wall!

It is absolutely NOT a fair tax, my daughter didn't earn it, but I did, and paid a fair amount of tax on it! (I don't believe 40+% is fair but that's another thread)...

You have paid tax on it, possibly, but she hasn't. And btw, inheritance isn't a gift, if you want it to be a gift, then you will need to give it while you are still alive. Dead people are not able to give anything, or to do anything else apart from decompose.

[Jim1556]

Craigyp79 said:

There are people out there that have worked all their life, possible even harder than you, earning minimum wage and struggling to get by from day to day. These are the people that need the support of society, and the higher burden unfortunately rests on the people that have more money than others.

This is the society that you choose to live in and profit from, it is and never will be totally fair and the government should be working hard to try and make it fairer, unfortunately politicians seem to have forgot that this is there reason for being (if it ever was such..)

If you spend a large amount on supporting charities or volunteering for support groups then I do sympathise that you feel your daughter will be hard done by.

But if you are sitting there with a massive sense of entitlement looking down on those that don't and never will have the opportunities afforded to you, then you deserve all the tax you get.

My attitude isn't a reason to tax me though is it? And I have worked hard to get where I am - I'm not a poor little rich kid, if my daughter is turns into a sponging cow, then she'll get nothing, being self sufficient is something we should all aspire to (I'm not there yet, but will continue to try).

Some people have issues with multi millionaires, but if they've earned that, think how much tax they've already paid on that!

[Jim1556]

RobinOakapple said:

You have paid tax on it, possibly, but she hasn't. And btw, inheritance isn't a gift, if you want it to be a gift, then you will need to give it while you are still alive. Dead people are not able to give anything, or to do anything else apart from decompose.

The 7 year rule ignores gifts, whichever way you look at it, the government wants a chunk!

As an employee, there's no possibly about it, I've always paid my tax (not like I have a choice with PAYE).

[Jasandjules]

TwigtheWonderkid said:

For all the reasons I've already highlighted. The people receiving the money it have done nothing to earn it.

So then all trust funds should be taxed correct?

What about interest on bank accounts?

What about appreciation on your classic car or house? When you sell whilst alive, should you pay tax?