I said I agreed with the current 7 year IHT taper on gifts.
Millennials are likely to enjoy the biggest "inheritance boom"
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Soldato
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I've always thought inheritance tax was a pretty bizarre tax - if the money has been properly taxed going in, then why should it be taxed again when it gets handed to someone else?
Doesn't really bother me anyway as I'd hope my folks spend everything they have before they die!
Doesn't really bother me anyway as I'd hope my folks spend everything they have before they die!
I don't think it is easy to avoid with the 7-year taper. that's a long time in advance you have to go to avoid a lump of tax.
As I said, going without that wealth is a sacrifice and, I suppose, a risk. Especially trying to do it to avoid all IHT by beating the 7-year mark
Well, that's why it should go to a flat 75% with no nil rate band
(I know it'll never happen - too politically suicidal. Just don't understand why it's so unpopular though)
To be honest, gifts should be taxed like any other Capital Gains above a certain minimum, say 5k. this does get complex when richer people give generous presents, but really there transfer of cash or assets is a major tax avoidance scheme and it is also nonsensitive. E.g., with income tax you work damn hard 40+ hours a week just to be slammed with a 40% tax rate. Someone gifts you 100K for which you did no work and there is no tax.
Similar with lottery and gaming winnings, much more sensible in the US where these get taxed.
Pensions get hit by tax when the pot goes over £1mil
£1m pension annuity is only ~ £45k per year. Gets tight if you're paying big market rent on a large property you've gifted early
Pensions get hit by tax when the pot goes over £1mil
£1m pension annuity is only ~ £45k per year. Gets tight if you're paying big market rent on a large property you've gifted early
whcih is why you should downsize, or move out and rent-out the large property
Well, that's why it should go to a flat 75% with no nil rate band
(I know it'll never happen - too politically suicidal. Just don't understand why it's so unpopular though)
Problem there is the administration costs... for small estates they'd maybe outweigh the gain from taxing them... I mean I had a grandparent who lived in a a super low rent flat and then lived in a council run care home, she had a few thousand in savings (of which I inherited approx £700) some jewellery and some old ornaments/personal effects in a few boxes at my uncles house. It would be a big waste of everyone time if someone had to check all of that and deduct 75% Would we have to get the sentimental items/old china ornaments valued individually and make sure we paid enough to covert them etc..? I mean her estate was perhaps worth 5k or so tops... it just isn't worth HMRC's time AFAIK.
Yeah, you're right. There would need to be a nominal allowance.
One of my grandparents died and there wasn't enough wealth, from all sources (including selling stuff) to cover the funeral costs.
And that's all fine - but it won't be attractive for everyone. That's a quite sizeable set of adjustments going into your dotage.
And I'm ok with that being enough to avoid IHT. You've sacrificed for that.
(and £45k for someone rich enough to build up a £1mil pension pot isn't much. You still pay income tax on that too)
Then a big IHT rate is also encouraging pensioners to live more suitably. It's win win.
Who do we send our proposal to?
Not really. Each child still get the same amount as each other, they just get taxed on it individually. The one that’s already taken a £50k capital gain that year will have to pay more tax. It could be argued that that tax is then charged on the other gain, so they receive exactly the same amount.
Let’s be clear, I’m not a fan of inheritance tax, but a system that taxes the recipient rather than the donor is a better system in my books.
But your first example is basically what you’re proposing in the second part. How can you be against the former if you’re for equalizing inheritance?
As already mentioned though the very last point is a bit of a misnomer because inheritance now normally comes when people have already settled down and are already most of the way through a mortgage anyway.
It doesn’t seem to have worked here or in many other places it’s used. See Vancouver and Toronto as examples.
To most end users it’s exactly the same as council tax, except rather than bands that haven’t changed in 30 years (there is always discussions on reassessments) it’s a sliding scale based on the “exact” value of your house that year. So that saves two very similar houses ending up with two vastly different bills because they straddle a band.
At least in canada Property tax is also equalized, so as long as you’re house doesn’t go up disproportionately in value then you pay the same tax year after year anyway. Hence why it hasn’t really helped in the places listed above. If all the houses in the city go up 50% in two years (not far off the Vancouver rate) then the property tax on each property is still the same. It only really affects you if you add significant value to your own property (major extension for example) as the value of your property goes up disproportionately.
And why should inheritance be any different to capital gains, which is also “unearned” income and taxed at a much lower rate than 75%.
Because the person who earned and owns that cash is dead and no longer has any use for it.
So you’re completely honest then that you’re happy with a death tax.
And since when has “use” been a legitimate reason to take money from people? Where does it end? Tha millionaire doesn’t have “use” for the money they just got from selling their second house for 300% more than they bought it for 10 years ago, let’s take 75% of that too (IIRC currently that would be a capital gain and taxed as one).
I’m not disagreeing with your quote, just adding to it.
In a world where taxation is necessary, I'm 100% in favour of death taxes. so yes, completely honest.
A dead person derives precisely zero utility from wealth. They're dead. I believe in a progressive tax system, and dead people have the lowest 'need' of anyone - so tax them the most.
estates are subject to capital gains tax
IHT deals with the transfer of assets and is taxed at a rather higher rate than capital gains tax
CGT gives you an annual allowance (currently circa 11k per year) and can be offset by losses you've incurred too, you tally up that allowance over your lifetime and you're allowed rather a lot of gains... on the other hand IHT deals with what are often one off transfers and you have a larger nil rate band/allowance there
IHT is already at 40%, CGT is at 20 and 28%...
I don't think the current IHT system is ideal at all, I do wonder if we're going the wrong way with special exemptions for primary residence etc.. perhaps property would be the one thing that is much simpler to tax, easy record of it being sold etc..and so taxing the transfer of homes/encouraging people to dispose of homes they don't need (it isn't helpful to have lone widowers occupying 5 bedroom detached house) would perhaps be good to see
I get what you're saying but I don't think many parents would see it that way. If they gifted £50,000 to each child during their lifetime, each child would get £50,000. If the same £50,000 was transferred as part of an inheritance then these proposals would see one receive less than the other.
It is very difficult to find the right way forwards. Ultimately, the majority of ideas in this thread are about amending or tweaking the existing system. Perhaps it would be better to look at what outcome is being sought, i.e. is the idea to maintain and / or grow the £6 billion annual income to the exchequer from inheritance tax or is the desired outcome to ensure that inheritances are incentivised to be left to those who pay less tax and therefore arguably could benefit more from the money.
The political answer is of course to take as much money as you can while minimising or reducing the cost to those likely to vote for you. And that broadly describes the thousands of tweaks we've had to the same taxation framework in the UK over the past 50 years.