Starmergeddon: They Came And Ate Us

[Paddington Bear]

Again I can only speak in generalities, but I look at my contemporaries from say 25-40 and I largely see a pretty hard working, diligent bunch who are being screwed by a country that offers them massively lower living standards than it did their predecessors not so long ago (mentioned before my friend who’s Dad was a high street accountant with a stay at home wife who sent three kids to prep school, had two cars and a nice enough detached house, that’s millionaire territory 20 or so years on).

Which is why increasing the tax on working people is terrible.

An English speaking country which isn't providing a globally competitive income/standard of life, is a tough position to have. There used to be a large consistent outflow of Irish to UK/US/Aus, enough for it to be economically damaging and self re-enforcing. There's just a lot of English speaking countries to choose from, it's not prohibitively difficult for any young person or graduate to emigrate. Anyone can stick their CV into a job site and calculate their uplift.

Labour have a chance at building a voting coalition around working people (surely the point of Labour). Probably sunk it's more of the same (cue the Neeps post).

You're right Ox, the UK is basically destroying itself by encouraging young people to leave and the vacuum to be filled by no-one.

It’s a problem across the English speaking world - Ireland’s housing situation (at least in Dublin) is much worse than ours in London. Canada, the US and Oz having housing crises is essentially comical but yet they do. Which is why I think emigration remains a trickle rather than a flood, there’s only a small number of countries Brits have ever really looked to go to and the numbers don’t quite stack up enough for most (that is changing as things get progressively shitter, and I must admit that having married a woman from the Channel Islands which gives us both full working and housing rights there we have begun to talk seriously about it). As talented people leave we pile in unskilled workers from the third world which exacerbates just about every issue that makes people consider emigrating in the first place

[I like neeps]

Again I can only speak in generalities, but I look at my contemporaries from say 25-40 and I largely see a pretty hard working, diligent bunch who are being screwed by a country that offers them massively lower living standards than it did their predecessors not so long ago (mentioned before my friend who’s Dad was a high street accountant with a stay at home wife who sent three kids to prep school, had two cars and a nice enough detached house, that’s millionaire territory 20 or so years on).

Which is why increasing the tax on working people is terrible.

An English speaking country which isn't providing a globally competitive income/standard of life, is a tough position to have. There used to be a large consistent outflow of Irish to UK/US/Aus, enough for it to be economically damaging and self re-enforcing. There's just a lot of English speaking countries to choose from, it's not prohibitively difficult for any young person or graduate to emigrate. Anyone can stick their CV into a job site and calculate their uplift.

Labour have a chance at building a voting coalition around working people (surely the point of Labour). Probably sunk it's more of the same (cue the Neeps post).

Welcome aboard

[Biffer]

I think, perhaps, you’re ignoring the fact that half a million pounds plus 60% of everything above that is a heck of a lot of money.

Houses are selling for five, six, seven times the original price after 25 years without a penny of CGT being payable. If someone is fortunate enough to work in a sector where they also get a big private pension as well as being able to put money away in savings accounts where they make money on the capital via interest rates, then good on them, but put something back into the system that was so good to them. You can be sure that most will not be in that position.

Taxing the beneficiaries of a million pound estate to the extent that it leaves them with £800,000, really for no effort or even input on their part, doesn’t seem like an injustice to me.

And you are ignoring my basic point that it is unfair that, having paid a huge amount of tax on money when it was earned, you are then taxed again on the same money when you die.

You are also ignoring my point that it is a disincentive to wealth creation which has in our case made us decide it is no longer worth one us earning and paying income tax only to lose another 40% of what is left on death. Would you bother earning money if you you were ultimately going to lose almost 70% of it in tax?

It is not the beneficiaries who are being taxed. France has an inheritance tax system where the beneficiaries are taxed on what they receive relative to what they receive and their current financial position, we have a death tax system.

I am not for one moment ignoring how much money it is. I know it is a lot of money because my wife and I worked hard and were successful in building it. Along the way we created wealth and jobs and paid a lot of tax. The economy benefitted from our working lives and now our success is to be taxed and part taken away when we die.

The first point that sticks out there for me is referring to the French tax system, iirc, David Beckham agreed to donate his four million Euro salary at PSG to children's' charities because if he had accepted a penny he would be liable for all his international income being taxed in France, so it was cheaper to lose the four million - it's probably not relevant to this but it just popped into my head.

We pay double and triple taxes all the time - our income is taxed and we used that taxed income to buy goods and services which are subject to another tax, in the case of, say, a bottle of whisky, we pay duty and vat on it. If you buy a car you pay vat, road tax and insurance premium tax, then there's vat on garage bills. There are items such as children's shoes that are not subject to vat, but on practically everything else there is a secondary tax.

If I have investments I pay tax on the increase in value of the investments when I cash them in, if I have a private pension provision I get a quarter of it tax-free and I can ensure that I only pay low end tax on the rest by being careful when I draw down lump sums.
If I buy bonds with money I've earned and been taxed on, the same applies, I pay tax on the return when the bond matures. I'm stressing the point that tax will be paid on these assets at some stage

I don't accept the premise that I am paying tax when I'm dead, when I peg it and pass those assets on to my children they get the assets for doing nothing and they certainly won't have paid any tax on them.

Exactly. This 'I'm getting taxed twice' thing is bullshit. It happens every day to all of us.

And on unearned vs earned income - for your kids inherited wealth is unearned.

[C T]

It's just all really quite emotive, IHT.

As an example I am due to inherit absolutely nothing, and not really at the point in life where I'm thinking about what I will leave for my kids.

So perhaps not too much of a surprise that I'm in favour of increasing IHT.

I appreciate the "I worked hard for this", and of course the leaving money for your kids aspect.

My dad worked very hard as a plumber, travelling all over Scotland. 13 to 14 hours most days (including travel). My mum raised 6 kids.

Most people work hard, some people earn more doing it. How much you earn does not equal how hard you work (there will be exceptions, sure).

Even if it is increased wealthy people will be able to leave their kids a substantial sum, poor people won't.

[weegie01]

We pay double and triple taxes all the time - our income is taxed and we used that taxed income to buy goods and services which are subject to another tax, in the case of, say, a bottle of whisky, we pay duty and vat on it. If you buy a car you pay vat, road tax and insurance premium tax, then there's vat on garage bills. There are items such as children's shoes that are not subject to vat, but on practically everything else there is a secondary tax.

If I have investments I pay tax on the increase in value of the investments when I cash them in, if I have a private pension provision I get a quarter of it tax-free and I can ensure that I only pay low end tax on the rest by being careful when I draw down lump sums.
If I buy bonds with money I've earned and been taxed on, the same applies, I pay tax on the return when the bond matures. I'm stressing the point that tax will be paid on these assets at some stage.

I don't accept the premise that I am paying tax when I'm dead, when I peg it and pass those assets on to my children they get the assets for doing nothing and they certainly won't have paid any tax on them.

Expenditure taxes are fundamentally different from IHT. A person can choose whether or not to make the expenditure and pay the tax. I was not aware I had a choice in whether or not I die. Expenditure involves a (more or less) fair exchange of value. I give money and in return get a benefit. If I don't think the benefit is worth it I do not make the purchase. There is no exchange of value in IHT, value goes one way.

I have no idea what you are talking about re pension. Contributions are tax exempt, drawings other than lump sum are taxable. You get a benefit from the tax free lump sum, and may do from paying a lower rate on drawings than you got input relief. What has that got to do with IHT?

You quote your bond example as paying tax on tax. I'd pay the same tax in the same situation, and then pay a third layer on top when IHT is levied. I don't see what point you are trying to make.

In an true inheritance tax system the inheritor pays tax on what they inherit according the system in place. These are designed so that a well off inheritor pays more tax than a poorer one with the same inheritance. You can choose not to accept it all you like, but we have a system where the dead person's estate pays the tax, there is no tax liablity on the inheritor.

If you take your argument to its logical conclusion, you should be arguing for no IHT exemption. If it is wrong for children to inherit assets for doing nothing and on which they will not have paid tax, then surely that must be wrong for everyone.

[weegie01]

Exactly. This 'I'm getting taxed twice' thing is bullshit. It happens every day to all of us.

And on unearned vs earned income - for your kids inherited wealth is unearned.

See my reply to TH.

[Sandstorm]

Exactly. This 'I'm getting taxed twice' thing is bullshit. It happens every day to all of us.

And on unearned vs earned income - for your kids inherited wealth is unearned.

See my reply to TH.

Is there any tax that you and your rich wife are happy to pay this year? Or should it all go into your vault at Gringotts for your boys to spend on wands and quidditch brooms?

[Tichtheid]

We pay double and triple taxes all the time - our income is taxed and we used that taxed income to buy goods and services which are subject to another tax, in the case of, say, a bottle of whisky, we pay duty and vat on it. If you buy a car you pay vat, road tax and insurance premium tax, then there's vat on garage bills. There are items such as children's shoes that are not subject to vat, but on practically everything else there is a secondary tax.

If I have investments I pay tax on the increase in value of the investments when I cash them in, if I have a private pension provision I get a quarter of it tax-free and I can ensure that I only pay low end tax on the rest by being careful when I draw down lump sums.
If I buy bonds with money I've earned and been taxed on, the same applies, I pay tax on the return when the bond matures. I'm stressing the point that tax will be paid on these assets at some stage.

I don't accept the premise that I am paying tax when I'm dead, when I peg it and pass those assets on to my children they get the assets for doing nothing and they certainly won't have paid any tax on them.

Expenditure taxes are fundamentally different from IHT. A person can choose whether or not to make the expenditure and pay the tax. I was not aware I had a choice in whether or not I die. Expenditure involves a (more or less) fair exchange of value. I give money and in return get a benefit. If I don't think the benefit is worth it I do not make the purchase. There is no exchange of value in IHT, value goes one way.

I have no idea what you are talking about re pension. Contributions are tax exempt, drawings other than lump sum are taxable. You get a benefit from the tax free lump sum, and may do from paying a lower rate on drawings than you got input relief. What has that got to do with IHT?

You quote your bond example as paying tax on tax. I'd pay the same tax in the same situation, and then pay a third layer on top when IHT is levied. I don't see what point you are trying to make.

In an true inheritance tax system the inheritor pays tax on what they inherit according the system in place. These are designed so that a well off inheritor pays more tax than a poorer one with the same inheritance. You can choose not to accept it all you like, but we have a system where the dead person's estate pays the tax, there is no tax liablity on the inheritor.

If you take your argument to its logical conclusion, you should be arguing for no IHT exemption. If it is wrong for children to inherit assets for doing nothing and on which they will not have paid tax, then surely that must be wrong for everyone.

The point, I thought, was fairly clear, that we all pay taxes more than once, your income is an already-taxed asset which gets taxed again when it is spent or used to gain more income.

I've been through this in the last few months and I think it's a fairly semantic point to state that the inheritors don't pay IHT. I couldn't get the letter of confirmation from HMRC until IHT was paid, the value of the estate was X. If there was no IHT the beneficiaries would inherit X. The amount inherited is X minus Y (IHT plus sundry costs).

A dead person can't do anything, so they can't pay tax. The fact that the money is taken out of the estate is irrelevant - do the beneficiaries get less from the estate as a result of IHT? It's fairly obvious that they do.
If there had been a miscalculation of IHT then we would be held liable for meeting any shortfall and we'd be the beneficiaries of any overpayment, this is made clear in the documentation - we paid IHT.

edited to add - I've just had a look to see what happens when there isn't enough money in the estate to pay IHT. If the value is in land and buildings but no money, then either the representatives can pay it themselves in lieu of selling the assets, or they have to apply for a loan to pay it , or these representatives can apply to pay it in instalments over 10 years - neither the dead person nor the estate is actually doing this.

btw HMRC add interest to the IHT if it's not settled in 6 months after the date of death. The length of time probate takes means this can be touch and go.

[Biffer]

Exactly. This 'I'm getting taxed twice' thing is bullshit. It happens every day to all of us.

And on unearned vs earned income - for your kids inherited wealth is unearned.

See my reply to TH.

You don't pay inheritance tax. You're dead. Your estate pays it. It's not your money anymore.

You probably don't consider yourself as part of the top 5%,do you?

[dpedin]

We pay double and triple taxes all the time - our income is taxed and we used that taxed income to buy goods and services which are subject to another tax, in the case of, say, a bottle of whisky, we pay duty and vat on it. If you buy a car you pay vat, road tax and insurance premium tax, then there's vat on garage bills. There are items such as children's shoes that are not subject to vat, but on practically everything else there is a secondary tax.

If I have investments I pay tax on the increase in value of the investments when I cash them in, if I have a private pension provision I get a quarter of it tax-free and I can ensure that I only pay low end tax on the rest by being careful when I draw down lump sums.
If I buy bonds with money I've earned and been taxed on, the same applies, I pay tax on the return when the bond matures. I'm stressing the point that tax will be paid on these assets at some stage.

I don't accept the premise that I am paying tax when I'm dead, when I peg it and pass those assets on to my children they get the assets for doing nothing and they certainly won't have paid any tax on them.

Expenditure taxes are fundamentally different from IHT. A person can choose whether or not to make the expenditure and pay the tax. I was not aware I had a choice in whether or not I die. Expenditure involves a (more or less) fair exchange of value. I give money and in return get a benefit. If I don't think the benefit is worth it I do not make the purchase. There is no exchange of value in IHT, value goes one way.

I have no idea what you are talking about re pension. Contributions are tax exempt, drawings other than lump sum are taxable. You get a benefit from the tax free lump sum, and may do from paying a lower rate on drawings than you got input relief. What has that got to do with IHT?

You quote your bond example as paying tax on tax. I'd pay the same tax in the same situation, and then pay a third layer on top when IHT is levied. I don't see what point you are trying to make.

In an true inheritance tax system the inheritor pays tax on what they inherit according the system in place. These are designed so that a well off inheritor pays more tax than a poorer one with the same inheritance. You can choose not to accept it all you like, but we have a system where the dead person's estate pays the tax, there is no tax liablity on the inheritor.

If you take your argument to its logical conclusion, you should be arguing for no IHT exemption. If it is wrong for children to inherit assets for doing nothing and on which they will not have paid tax, then surely that must be wrong for everyone.

But you have a choice when alive whether to spend your money or save/invest it for your beneficiaries - you still have a choice in the same way as spending extra cash on other items! It is the same transactional process as buying a car or a house, you know the tax implications of both choices. There is a choice between expenditure and saving/investing in the full knowledge that a tax will be applied, albeit at different rates, to both at some point, either when the purchase is made or when I die and if there is IHT to be paid. For example I've told my kids that they will inherit my house and other savings/assets but I am spending my pension pots and other cash I have before I die. It is likely my house will not exceed the IHT limits but it might depending how long I live and if IHT allowances move. This is an informed choice in part based on what I know about the tax implications of the decision.

[Hal Jordan]

For anybody worried about IHT on your income, the solution is to give away your surplus income every tax year. Not a penny of IHT will ever be payable on it either at the time of payment or on your death, and your kids can enjoy your wealth that much sooner.

Take advice on this, however.

[inactionman]

For anybody worried about IHT on your income, the solution is to give away your surplus income every tax year. Not a penny of IHT will ever be payable on it either at the time of payment or on yoir death, and your kids can enjoy your wealth that much sooner.

Take advice on this, however.

I'm not sure you're entirely tongue out of cheek, but my dad is getting increasingly into this. He's going through all the analysis to figure out how to reduce liabilities on his inheritance by setting up various things now, he's a retired accountant so he's happy as a pig in shit working it all out.

I find it all a bit difficult as (i) I'm not an accountant and (ii) it's just illustrating his mortality.

[Hal Jordan]

For anybody worried about IHT on your income, the solution is to give away your surplus income every tax year. Not a penny of IHT will ever be payable on it either at the time of payment or on yoir death, and your kids can enjoy your wealth that much sooner.

Take advice on this, however.

I'm not sure you're entirely tongue out of cheek, but my dad is getting increasingly into this. He's going through all the analysis to figure out how to reduce liabilities on his inheritance by setting up various things now, he's a retired accountant so he's happy as a pig in shit working it all out.

I find it all a bit difficult as (i) I'm not an accountant and (ii) it's just illustrating his mortality.

I'm not tongue in cheek, gifts out of surplus income are free from IHT is correctly done during the donor's lifetime.

The best way to reduce your IHT bill is to spend it before you go.

And remember, if you are thinking of giving it away, just have one eye on your infirmity, the cost of care is eye-watering and will have a good go at your funds. The old adage of don't let the tax tail wag the dog is the key.

[I like neeps]

The people paying IHT now will likely be the ones of the age where you got more from the welfare state than you pain in. It's time they coughed up their fair share.

The sad reality that no politician will go near is that with free at the point of use health-care, triple locked pensions, and ballooning social care costs that councils can't afford and are almost all close to going bankrupt we just can't afford to have such a large public spend on an increasingly old and unhealthy population. Taxes have to be able to claw that back somehow and the main beneficiaries should have to pay it back.

"I paid into the system all my life". Not as much as you got back I'm afraid and the bill has come due.

[charltom]

You can't tax a dead person - you can however tax their estate after death.

We are still talking about a tax that currently only affects 4% of the population and even with housing inflation, or unearned income as a result of market forces, might drag in another few % over the next few years. The vast majority of folk in UK will never ever get close to having an estate large enough to worry about IHT, the average estate in the UK was £334k last year. The whole outcry around IHT is being drummed up by the likes of the Mail and Express who are looking after themselves and their mates who will be impacted by closing of loopholes and swallowed by many as if it will impact them. In the vast majority of those who will be dragged into IHT then it will be down to unearned income resulting from the increase in value of their house upon which they paid no tax whilst alive. Seems fair enough to me that someone pays tax on this at some point, either during their life or when they have died!

You are arguing semantics about who is taxed. The tax is calculated on the estate of the dead person and paid by the people the dead person appointed to represent them. The key point is it is not an inheritance tax which is taxed in the hands of the beneficiaries taking into account their financial position.

Most of the income tax in this country is paid by a relatively small group of people. Who are the same group who get hit again by IHT. IHT may not be an issue for most people but for those who pay the most in income and other taxes it is a very live issue indeed. It is easy for those who will not be affected by IHT to believe others should pay it. It is a whole different ball game when it is your money that you have worked to earn and you have already put more money than most into the tax system.

I endorse everyone being taxed on unearned profits on rising property prices

...as long as you bring back indexation relief!

[dpedin]

The people paying IHT now will likely be the ones of the age where you got more from the welfare state than you pain in. It's time they coughed up their fair share.

The sad reality that no politician will go near is that with free at the point of use health-care, triple locked pensions, and ballooning social care costs that councils can't afford and are almost all close to going bankrupt we just can't afford to have such a large public spend on an increasingly old and unhealthy population. Taxes have to be able to claw that back somehow and the main beneficiaries should have to pay it back.

"I paid into the system all my life". Not as much as you got back I'm afraid and the bill has come due.

Total tax revenue as a share of GDP in UK is lower than the EU14 average, NHS spend per capita is lower than many other comparable EU countries (France, Germany, Switzerland, Holland, Belgium, etc), UK state pension is well below the OECD average. Raising more tax and spending more on NHS, pensions, public services, etc is well within our parameters when compared with most other EU countries so I guess it's all about political choices about how we raise tax and how we spend it? How we raise the taxes is also a political choice. I've a mate who has lived in Belgium for 20 years, a country which is one of the highest taxed in the EU, he has decided not to come back to UK now retired and has become a Belgian citizen. He had the option to return to lower taxed UK but prefers properly funded public services ... oh and Brexit didnt help!

[Biffer]

The people paying IHT now will likely be the ones of the age where you got more from the welfare state than you pain in. It's time they coughed up their fair share.

The sad reality that no politician will go near is that with free at the point of use health-care, triple locked pensions, and ballooning social care costs that councils can't afford and are almost all close to going bankrupt we just can't afford to have such a large public spend on an increasingly old and unhealthy population. Taxes have to be able to claw that back somehow and the main beneficiaries should have to pay it back.

"I paid into the system all my life". Not as much as you got back I'm afraid and the bill has come due.

Total tax revenue as a share of GDP in UK is lower than the EU14 average, NHS spend per capita is lower than many other comparable EU countries (France, Germany, Switzerland, Holland, Belgium, etc), UK state pension is well below the OECD average. Raising more tax and spending more on NHS, pensions, public services, etc is well within our parameters when compared with most other EU countries so I guess it's all about political choices about how we raise tax and how we spend it? How we raise the taxes is also a political choice. I've a mate who has lived in Belgium for 20 years, a country which is one of the highest taxed in the EU, he has decided not to come back to UK now retired and has become a Belgian citizen. He had the option to return to lower taxed UK but prefers properly funded public services ... oh and Brexit didnt help!

And for three or four decades, we've paid a lower rate of tax than we needed to for the public services we've received. The tax income has been subsidised by pile revenue, privatisation of public companies and sale of other public assets, and debt. We're now at the point that it can't continue, but we have two entire generations who've spent most of their working lives in this situation and don't realise their services weren't all paid for by their taxes. And they don't believe it when you tell them.

[I like neeps]

The people paying IHT now will likely be the ones of the age where you got more from the welfare state than you pain in. It's time they coughed up their fair share.

The sad reality that no politician will go near is that with free at the point of use health-care, triple locked pensions, and ballooning social care costs that councils can't afford and are almost all close to going bankrupt we just can't afford to have such a large public spend on an increasingly old and unhealthy population. Taxes have to be able to claw that back somehow and the main beneficiaries should have to pay it back.

"I paid into the system all my life". Not as much as you got back I'm afraid and the bill has come due.

Total tax revenue as a share of GDP in UK is lower than the EU14 average, NHS spend per capita is lower than many other comparable EU countries (France, Germany, Switzerland, Holland, Belgium, etc), UK state pension is well below the OECD average. Raising more tax and spending more on NHS, pensions, public services, etc is well within our parameters when compared with most other EU countries so I guess it's all about political choices about how we raise tax and how we spend it? How we raise the taxes is also a political choice. I've a mate who has lived in Belgium for 20 years, a country which is one of the highest taxed in the EU, he has decided not to come back to UK now retired and has become a Belgian citizen. He had the option to return to lower taxed UK but prefers properly funded public services ... oh and Brexit didnt help!

I do think it's inevitable within 30-40 years that we move towards a European healthcare model which means mandatory health insurance for most.

[dpedin]

The people paying IHT now will likely be the ones of the age where you got more from the welfare state than you pain in. It's time they coughed up their fair share.

The sad reality that no politician will go near is that with free at the point of use health-care, triple locked pensions, and ballooning social care costs that councils can't afford and are almost all close to going bankrupt we just can't afford to have such a large public spend on an increasingly old and unhealthy population. Taxes have to be able to claw that back somehow and the main beneficiaries should have to pay it back.

"I paid into the system all my life". Not as much as you got back I'm afraid and the bill has come due.

Total tax revenue as a share of GDP in UK is lower than the EU14 average, NHS spend per capita is lower than many other comparable EU countries (France, Germany, Switzerland, Holland, Belgium, etc), UK state pension is well below the OECD average. Raising more tax and spending more on NHS, pensions, public services, etc is well within our parameters when compared with most other EU countries so I guess it's all about political choices about how we raise tax and how we spend it? How we raise the taxes is also a political choice. I've a mate who has lived in Belgium for 20 years, a country which is one of the highest taxed in the EU, he has decided not to come back to UK now retired and has become a Belgian citizen. He had the option to return to lower taxed UK but prefers properly funded public services ... oh and Brexit didnt help!

I do think it's inevitable within 30-40 years that we move towards a European healthcare model which means mandatory health insurance for most.

The Kings Fund did an interesting and detailed study of different models of funding healthcare from around the world. The main finding was that'

'All funding permutations have strengths and weaknesses and no health care system performs systematically better in delivering cost-effective care. In countries committed to values like equity, the main choice is between taxation and social insurance as the main way of raising resources. The enormous costs and complexity of shifting from one to the other explains why this route has never been taken in western Europe. Despite its faults, taxation has served the UK well since 1948 – notwithstanding the pressures that services are under. The focus should now be on improving how the current funding system works, rather than changing it fundamentally. A good start would be to revisit the work of the Barker Commission and its proposals for a new health and social care settlement, paid for by changes in how public spending is used along with increases in taxes and National Insurance Contributions.'

In other words there is no real relationship between how healthcare funding is raised and how good the healthcare system is. The level of funding per capita however is hugely important and as I said earlier the UK lags behind comparable countries. Kings fund also point out that to transition current funding model for the NHS would be hugely expensive, create a huge dip in performance and probably deliver no better outcomes in the long run.

Folk who constantly bang on about why we need to change the current NHS funding model never really explain why we have to, what model we should adopt, how much it would cost to do so and why that will deliver better outcomes ... particularly when most of the evidence points to the fact it would be hugely expensive to shift, cost individuals more, demand a higher % of GDP and likely to deliver no better outcomes. Surely it would be easier to just fund the NHS to the average per capita spend of our comparable EU neighbors?

[weegie01]

Exactly. This 'I'm getting taxed twice' thing is bullshit. It happens every day to all of us.

And on unearned vs earned income - for your kids inherited wealth is unearned.

See my reply to TH.

Is there any tax that you and your rich wife are happy to pay this year? Or should it all go into your vault at Gringotts for your boys to spend on wands and quidditch brooms?

I'd be quite content if estates paid tax as if the deceased had disposed of the estate at the point of death. So for example capital gains are paid on any capital gains realised. But remove the residential CGT exemption to make us and everyone else liable for unearned gains from rising house prices.

[weegie01]

The point, I thought, was fairly clear, that we all pay taxes more than once, your income is an already-taxed asset which gets taxed again when it is spent or used to gain more income.

I've been through this in the last few months and I think it's a fairly semantic point to state that the inheritors don't pay IHT. I couldn't get the letter of confirmation from HMRC until IHT was paid, the value of the estate was X. If there was no IHT the beneficiaries would inherit X. The amount inherited is X minus Y (IHT plus sundry costs).

A dead person can't do anything, so they can't pay tax. The fact that the money is taken out of the estate is irrelevant - do the beneficiaries get less from the estate as a result of IHT? It's fairly obvious that they do.
If there had been a miscalculation of IHT then we would be held liable for meeting any shortfall and we'd be the beneficiaries of any overpayment, this is made clear in the documentation - we paid IHT.

edited to add - I've just had a look to see what happens when there isn't enough money in the estate to pay IHT. If the value is in land and buildings but no money, then either the representatives can pay it themselves in lieu of selling the assets, or they have to apply for a loan to pay it , or these representatives can apply to pay it in instalments over 10 years - neither the dead person nor the estate is actually doing this.

btw HMRC add interest to the IHT if it's not settled in 6 months after the date of death. The length of time probate takes means this can be touch and go.

Not on the same taxable event.

If you earn money there has been an exchange of value. Tax is paid once on that taxable event. If the residue is put in the bank and left there, there is no further tax unless you die.

If some of the money is removed and used to buy a TV, there has been a second exchange of value, and second tax event where the value you receive is taxed. Two exchanges of value, two tax events. Whilst the exchange of value is a bit more tenuous in some tax events, as a general rule it holds that there is a taxable event in which value is exchanged.

In IHT there is no exchange of value, there has been no taxable event in which value has been exchange. There has been one exchange of value, but income tax is levied when the inital exchange of value took place, then IHT is levied later on the residue. IHT is the only tax levied on money which has previously been taxed without there the money having been used again in any other way.

I am sure someone will come up with an exception to the above, but as a general rule I think it holds it holds.

It is not a tax on inheritance.

Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died.

https://www.gov.uk/inheritance-tax

The tax is payable by the executor. There are abnormal situations where the burden may fall on the inheritors, but these exceptions do not alter the general case that the tax case it is paid by the executor out of the estate.

In the UK IHT the amount of tax paid varies according to the size of the estate. In a true inheritance tax system where tax is paid by the inheritor the tax is calculated in the hands of the inheritor. Essentially a person who inherits more pays more tax than one who inherits less, a more affluent recipient pays more than a poorer one on the same amount etc. It is a fundmentally different and fairer system.

[weegie01]

You can't tax a dead person - you can however tax their estate after death.

We are still talking about a tax that currently only affects 4% of the population and even with housing inflation, or unearned income as a result of market forces, might drag in another few % over the next few years. The vast majority of folk in UK will never ever get close to having an estate large enough to worry about IHT, the average estate in the UK was £334k last year. The whole outcry around IHT is being drummed up by the likes of the Mail and Express who are looking after themselves and their mates who will be impacted by closing of loopholes and swallowed by many as if it will impact them. In the vast majority of those who will be dragged into IHT then it will be down to unearned income resulting from the increase in value of their house upon which they paid no tax whilst alive. Seems fair enough to me that someone pays tax on this at some point, either during their life or when they have died!

You are arguing semantics about who is taxed. The tax is calculated on the estate of the dead person and paid by the people the dead person appointed to represent them. The key point is it is not an inheritance tax which is taxed in the hands of the beneficiaries taking into account their financial position.

Most of the income tax in this country is paid by a relatively small group of people. Who are the same group who get hit again by IHT. IHT may not be an issue for most people but for those who pay the most in income and other taxes it is a very live issue indeed. It is easy for those who will not be affected by IHT to believe others should pay it. It is a whole different ball game when it is your money that you have worked to earn and you have already put more money than most into the tax system.

I endorse everyone being taxed on unearned profits on rising property prices

...as long as you bring back indexation relief!

Absolutely.

Indexation would be a nightmare, so taxing these gains at less than income to broadly take account of inflation makes sense.

[Tichtheid]

The point, I thought, was fairly clear, that we all pay taxes more than once, your income is an already-taxed asset which gets taxed again when it is spent or used to gain more income.

I've been through this in the last few months and I think it's a fairly semantic point to state that the inheritors don't pay IHT. I couldn't get the letter of confirmation from HMRC until IHT was paid, the value of the estate was X. If there was no IHT the beneficiaries would inherit X. The amount inherited is X minus Y (IHT plus sundry costs).

A dead person can't do anything, so they can't pay tax. The fact that the money is taken out of the estate is irrelevant - do the beneficiaries get less from the estate as a result of IHT? It's fairly obvious that they do.
If there had been a miscalculation of IHT then we would be held liable for meeting any shortfall and we'd be the beneficiaries of any overpayment, this is made clear in the documentation - we paid IHT.

edited to add - I've just had a look to see what happens when there isn't enough money in the estate to pay IHT. If the value is in land and buildings but no money, then either the representatives can pay it themselves in lieu of selling the assets, or they have to apply for a loan to pay it , or these representatives can apply to pay it in instalments over 10 years - neither the dead person nor the estate is actually doing this.

btw HMRC add interest to the IHT if it's not settled in 6 months after the date of death. The length of time probate takes means this can be touch and go.

Not on the same taxable event.

If you earn money there has been an exchange of value. Tax is paid once on that taxable event. If the residue is put in the bank and left there, there is no further tax unless you die.

If some of the money is removed and used to buy a TV, there has been a second exchange of value, and second tax event where the value you receive is taxed. Two exchanges of value, two tax events. Whilst the exchange of value is a bit more tenuous in some tax events, as a general rule it holds that there is a taxable event in which value is exchanged.

In IHT there is no exchange of value, there has been no taxable event in which value has been exchange. There has been one exchange of value, but income tax is levied when the inital exchange of value took place, then IHT is levied later on the residue. IHT is the only tax levied on money which has previously been taxed without there the money having been used again in any other way.

I am sure someone will come up with an exception to the above, but as a general rule I think it holds it holds.

It is not a tax on inheritance.

Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died.

https://www.gov.uk/inheritance-tax

The tax is payable by the executor. There are abnormal situations where the burden may fall on the inheritors, but these exceptions do not alter the general case that the tax case it is paid by the executor out of the estate.

In the UK IHT the amount of tax paid varies according to the size of the estate. In a true inheritance tax system where tax is paid by the inheritor the tax is calculated in the hands of the inheritor. Essentially a person who inherits more pays more tax than one who inherits less, a more affluent recipient pays more than a poorer one on the same amount etc. It is a fundmentally different and fairer system.

You're talking about the physical act of making the payment, I'm talking about who bears the financial cost.

When my granny sent me to the shop for messages I bought them, but she gave me the money to do so - who bore the financial cost in that?

When I, as an executor, instructed the bank to pay IHT I was going to the shop for my Granny. As a beneficiary I bore the financial cost because I inherited less as a result of the cost of the payment. The bank made the actual payment

[weegie01]

You're talking about the physical act of making the payment, I'm talking about who bears the financial cost.

When my granny sent me to the shop for messages I bought them, but she gave me the money to do so - who bore the financial cost in that?

When I, as an executor, instructed the bank to pay IHT I was going to the shop for my Granny. As a beneficiary I bore the financial cost because I inherited less as a result of the cost of the payment. The bank made the actual payment

The estate bears the finacial cost.

In you example the granny is the estate, the messenger is the executor. Your Granny now has less money to other things as an outcome of bearing the cost of the messages just as the estate has less money as an outcome of bearing the cost of IHT.

Inheritors have no role to play. I make decisions in life that affect my finances and my estate. I leave instructions for my executor on how to deal with my estate in death. The executor executes my instructions and my estate bears the impact of those instructions. The inheritors are passive. You may as well say me buying a car reduces the amount they receive.

What about my explanation of why IHT is a double tax unlike the examples you quote? You and others seem very convinced that IHT being no different from the other instances justifies it.

[Biffer]

You're talking about the physical act of making the payment, I'm talking about who bears the financial cost.

When my granny sent me to the shop for messages I bought them, but she gave me the money to do so - who bore the financial cost in that?

When I, as an executor, instructed the bank to pay IHT I was going to the shop for my Granny. As a beneficiary I bore the financial cost because I inherited less as a result of the cost of the payment. The bank made the actual payment

The estate bears the finacial cost.

In you example the granny is the estate, the messenger is the executor. Your Granny now has less money to other things as an outcome of bearing the cost of the messages just as the estate has less money as an outcome of bearing the cost of IHT.

Inheritors have no role to play. I make decisions in life that affect my finances and my estate. I leave instructions for my executor on how to deal with my estate in death. The executor executes my instructions and my estate bears the impact of those instructions. The inheritors are passive. You may as well say me buying a car reduces the amount they receive.

What about my explanation of why IHT is a double tax unlike the examples you quote? You and others seem very convinced that IHT being no different from the other instances justifies it.

No, Granny is dead. The estate has less money.

[Tichtheid]

You're talking about the physical act of making the payment, I'm talking about who bears the financial cost.

When my granny sent me to the shop for messages I bought them, but she gave me the money to do so - who bore the financial cost in that?

When I, as an executor, instructed the bank to pay IHT I was going to the shop for my Granny. As a beneficiary I bore the financial cost because I inherited less as a result of the cost of the payment. The bank made the actual payment

The estate bears the finacial cost.

In you example the granny is the estate, the messenger is the executor. Your Granny now has less money to other things as an outcome of bearing the cost of the messages just as the estate has less money as an outcome of bearing the cost of IHT.

Inheritors have no role to play. I make decisions in life that affect my finances and my estate. I leave instructions for my executor on how to deal with my estate in death. The executor executes my instructions and my estate bears the impact of those instructions. The inheritors are passive. You may as well say me buying a car reduces the amount they receive.

What about my explanation of why IHT is a double tax unlike the examples you quote? You and others seem very convinced that IHT being no different from the other instances justifies it.

I think this is a chicken and egg scenario where people will dig in depending on their point of view. My point of view is that my estate passes from being owned by me at my death and on to the benficiaries. Before the beneficiaries take possession of the estate, the executors are legally responsible for ensuring that my wishes are carried out and that the legal requirements are met.

I suppose there is a bit of a limbo period between death and confirmation being granted when the estate can be dispersed, but I very much doubt ownership of the estate can be legally challenged against those named in the will. In fact my solicitor told me it can only be challenged by someone who is a creditor to the deceased or a living spouse.

The beneficiaries of my estate are de facto the ones who pay IHT since they bear the financial costs and will receive less than they would if there was no IHT.

Any further comment from me on this would be another repetition of the same thing.

[Blackmac]

Looks like Labour MP Mike Amesbury is fucked. CCTV clearly shows him sucker punching the guy in the street last night and then punching him another 3 or 4 times in the head after he knocks him over. Has to be dragged off by passers by. Amesbury claims he was threatened but the guy he hits never takes his hands out of his pockets.

[tabascoboy]

It's not going at all well for Labour and they certainly aren't helping themselves in almost every respect

[Mahoney]

Get rid of IHT. If you receive total gifts or inheritance with value over £1,000 (or something like that) in a calendar year it has to be declared as income and taxed as such.

[Blackmac]

Get rid of IHT. If you receive total gifts or inheritance with value over £1,000 (or something like that) in a calendar year it has to be declared as income and taxed as such.

What, so you can't give kids or grandkids a big present for big occasions. Incredibly extreme.

[tabascoboy]

Looks like Labour MP Mike Amesbury is fucked. CCTV clearly shows him sucker punching the guy in the street last night and then punching him another 3 or 4 times in the head after he knocks him over. Has to be dragged off by passers by. Amesbury claims he was threatened but the guy he hits never takes his hands out of his pockets.

Now suspended and the whip withdrawn, so they acted fairly quickly at least

[JM2K6]

Get rid of IHT. If you receive total gifts or inheritance with value over £1,000 (or something like that) in a calendar year it has to be declared as income and taxed as such.

What, so you can't give kids or grandkids a big present for big occasions. Incredibly extreme.

Sure they can, they'd just to pay tax on it. The younger they are, the more likely that will just be a nominal or zero amount

[dpedin]

Get rid of IHT. If you receive total gifts or inheritance with value over £1,000 (or something like that) in a calendar year it has to be declared as income and taxed as such.

What, so you can't give kids or grandkids a big present for big occasions. Incredibly extreme.

Sure they can, they'd just to pay tax on it. The younger they are, the more likely that will just be a nominal or zero amount

Not unhappy with all income - earned, dividends, rents, inheritance, gifts etc - taxed on the same basis with bands and rates adjusted accordingly with few if any exemptions/loopholes for rich accountants to exploit. However we would need to tackle off shoring of funds, non doms, residency loopholes, etc as well. Just happy that everyone pays their fair share - why did Rich Sunak only pay 23% tax on his total income of £2.2m the same as someone on a way lower average wage? Answer - paid in dividends, capital gains tax rate of 20% and US location of some funds.

[JM2K6]

What, so you can't give kids or grandkids a big present for big occasions. Incredibly extreme.

Sure they can, they'd just to pay tax on it. The younger they are, the more likely that will just be a nominal or zero amount

Not unhappy with all income - earned, dividends, rents, inheritance, gifts etc - taxed on the same basis with bands and rates adjusted accordingly with few if any exemptions/loopholes for rich accountants to exploit. However we would need to tackle off shoring of funds, non doms, residency loopholes, etc as well. Just happy that everyone pays their fair share - why did Rich Sunak only pay 23% tax on his total income of £2.2m the same as someone on a way lower average wage? Answer - paid in dividends, capital gains tax rate of 20% and US location of some funds.

Yeah, for sure. I was just explaining Mahoney's suggestion. The whole thing needs an overhaul but I don't know how feasible that is.

[inactionman]

What, so you can't give kids or grandkids a big present for big occasions. Incredibly extreme.

Sure they can, they'd just to pay tax on it. The younger they are, the more likely that will just be a nominal or zero amount

Not unhappy with all income - earned, dividends, rents, inheritance, gifts etc - taxed on the same basis with bands and rates adjusted accordingly with few if any exemptions/loopholes for rich accountants to exploit. However we would need to tackle off shoring of funds, non doms, residency loopholes, etc as well. Just happy that everyone pays their fair share - why did Rich Sunak only pay 23% tax on his total income of £2.2m the same as someone on a way lower average wage? Answer - paid in dividends, capital gains tax rate of 20% and US location of some funds.

Just a small point of order - any dividends should have already been through corporation tax for any UK element, so the profits themselves are already taxed and the dividend comes from profit. if the money was earned/generated in the US, corporation taxes should be paid in the US and that element should not be taxed in the UK anyway.

As a small business owner I pay myself a small wage and the rest dividend - by the time it's all worked out and I've paid corporation tax, VAT and my own personal tax bill, it's pretty much the same thing as paying PAYE. The biggest exception is that employer's NI won't be paid to the same extent, although I will change VAT. I'm sure Rushi has a far more sophisticated approach for his fortunes, and takes greater advantage of the byzantine mess.

[I like neeps]

Looking forward to this week of continued insane discourse about who is a worker as Labour try and weasel out of their "no tax rises on workers" manifesto promises.

And it's all their own fault for not being honest when campaigning.

[Biffer]

What, so you can't give kids or grandkids a big present for big occasions. Incredibly extreme.

Sure they can, they'd just to pay tax on it. The younger they are, the more likely that will just be a nominal or zero amount

Not unhappy with all income - earned, dividends, rents, inheritance, gifts etc - taxed on the same basis with bands and rates adjusted accordingly with few if any exemptions/loopholes for rich accountants to exploit. However we would need to tackle off shoring of funds, non doms, residency loopholes, etc as well. Just happy that everyone pays their fair share - why did Rich Sunak only pay 23% tax on his total income of £2.2m the same as someone on a way lower average wage? Answer - paid in dividends, capital gains tax rate of 20% and US location of some funds.

Which they are, apparently, planning to do - non doms / residency stuff is also meant to be part of this budget.

[SaintK]

Looking forward to this week of continued insane discourse about who is a worker as Labour try and weasel out of their "no tax rises on workers" manifesto promises.

And it's all their own fault for not being honest when campaigning.

Yes. It also deflects away from the arseholes who got us into such a dreadful mess.

[Biffer]

Sure they can, they'd just to pay tax on it. The younger they are, the more likely that will just be a nominal or zero amount

Not unhappy with all income - earned, dividends, rents, inheritance, gifts etc - taxed on the same basis with bands and rates adjusted accordingly with few if any exemptions/loopholes for rich accountants to exploit. However we would need to tackle off shoring of funds, non doms, residency loopholes, etc as well. Just happy that everyone pays their fair share - why did Rich Sunak only pay 23% tax on his total income of £2.2m the same as someone on a way lower average wage? Answer - paid in dividends, capital gains tax rate of 20% and US location of some funds.

Just a small point of order - any dividends should have already been through corporation tax for any UK element, so the profits themselves are already taxed and the dividend comes from profit. if the money was earned/generated in the US, corporation taxes should be paid in the US and that element should not be taxed in the UK anyway.

As a small business owner I pay myself a small wage and the rest dividend - by the time it's all worked out and I've paid corporation tax, VAT and my own personal tax bill, it's pretty much the same thing as paying PAYE. The biggest exception is that employer's NI won't be paid to the same extent, although I will change VAT. I'm sure Rushi has a far more sophisticated approach for his fortunes, and takes greater advantage of the byzantine mess.

The question here is why are SME founders / directors advised to pay them selves substantially through dividends rather than salary if there isn't a tax advantage.

[inactionman]

Not unhappy with all income - earned, dividends, rents, inheritance, gifts etc - taxed on the same basis with bands and rates adjusted accordingly with few if any exemptions/loopholes for rich accountants to exploit. However we would need to tackle off shoring of funds, non doms, residency loopholes, etc as well. Just happy that everyone pays their fair share - why did Rich Sunak only pay 23% tax on his total income of £2.2m the same as someone on a way lower average wage? Answer - paid in dividends, capital gains tax rate of 20% and US location of some funds.

Just a small point of order - any dividends should have already been through corporation tax for any UK element, so the profits themselves are already taxed and the dividend comes from profit. if the money was earned/generated in the US, corporation taxes should be paid in the US and that element should not be taxed in the UK anyway.

As a small business owner I pay myself a small wage and the rest dividend - by the time it's all worked out and I've paid corporation tax, VAT and my own personal tax bill, it's pretty much the same thing as paying PAYE. The biggest exception is that employer's NI won't be paid to the same extent, although I will change VAT. I'm sure Rushi has a far more sophisticated approach for his fortunes, and takes greater advantage of the byzantine mess.

The question here is why are SME founders / directors advised to pay them selves substantially through dividends rather than salary if there isn't a tax advantage.

In my case, to smooth out what can be a very unpredictable, feast-and-famine income - the business will always receive all income and be taxed at a standard 20% for all profit, but I'll dole the cash out as I need it and not have to pay upper rate if the invoice happens to be paid to the business just before April 5.

Yes, that's tax management, but the tax years are ultimately arbitrary dates that don't always align to contract payment dates.

If you set up as a small business you can of course operate as a sole trader, but if you've any ambition to extend then it really needs to be either a limited partnership (if you're going in with peers) or limited company. The company does the earning, and you get paid from the company, and dividends are what the profit of the company go into. If your company is just disguised employment, where you're using the construct just for tax purposes, you go inside IR35 with your end client and get paid via PAYE anyway.

It used to be more of a wild west, I know people who did all the tricks such as writing off directors loans and closing the company down each year to only pay entrepreneur's tax. They're quite rightly being hammered down on but it still occurs. That should be more the focus of ire.