NPR

robmatic wrote: Mon Oct 21, 2024 4:38 am

Paddington Bear wrote: Sun Oct 20, 2024 9:21 pm Leaving aside the morality and ethics of hiking IHT, I have a suspicion that the headlines of a 50% rate will drive a lot of people to their nearest accountant/solicitor and might well be another entry for the Big Book of Labour Ideas to Raise Money That Actually Don’t.

I don't think it will make much difference either way beyond a headline and a perception as so few people pay IHT and avoidance levels must already be pretty entrenched with gifting and trusts.

It is also fairly meaningless as a redistributive policy as BOMAD is actually where the socially significant intergenerational wealth transfers are happening, but hey ho.

We used bank of granny to put two children through uni as the way grants and bursaries are set up it really only helps the first child, not the second or third, so our inheritance from grandma went to pay buy to let landlords’ mortgages.

I really resented that, I wouldn’t have resented paying the same amount to the uni for accommodation

The easiest way for the Govt to raise funds is to stop giving CGT relief on homes. Capital gains on people's homes are passive and unearned: they accrue from merely owning the home in a rising market. These gains are a pure windfall and taxing them would be consistent with the rhetoric on CGT, as well as taking some of the heat out of the housing market.

Of course no Govt will look at it as it would be politcal suicide even though it is fair as all home owners who sell pay the tax on unearned profits and the better off pay a higher rate.

Tichtheid wrote: Mon Oct 21, 2024 7:18 am

robmatic wrote: Mon Oct 21, 2024 4:38 am

Paddington Bear wrote: Sun Oct 20, 2024 9:21 pm Leaving aside the morality and ethics of hiking IHT, I have a suspicion that the headlines of a 50% rate will drive a lot of people to their nearest accountant/solicitor and might well be another entry for the Big Book of Labour Ideas to Raise Money That Actually Don’t.

I don't think it will make much difference either way beyond a headline and a perception as so few people pay IHT and avoidance levels must already be pretty entrenched with gifting and trusts.

It is also fairly meaningless as a redistributive policy as BOMAD is actually where the socially significant intergenerational wealth transfers are happening, but hey ho.

We used bank of granny to put two children through uni as the way grants and bursaries are set up it really only helps the first child, not the second or third, so our inheritance from grandma went to pay buy to let landlords’ mortgages.

I really resented that, I wouldn’t have resented paying the same amount to the uni for accommodation

In my day, you only got uni accommodation in first year anyway.

That was certainly better for your kids than the maintenance loan. If you are a graduate now, you basically get savaged by the student loan system if you can't pay upfront for the fees and living costs.

Tichtheid wrote: Mon Oct 21, 2024 7:09 am IHT payments will increase as the housing market pushes more estates above the half million pound threshold - that’s a fair amount of tax-free cash.

As things stand you can leave everything to your spouse without tax, you can leave up to £325k to you children without taxation, that threshold increases to £500k if you leave them a house too.

I see that as being a fairly generous allowance - half a million quid tax-free?
There's even a way for a couple to pass on a million quid tax-free, again this involves property as opposed to, say, stocks and shares.

There’s a fair chunk of people who I know don’t really consider themselves to need IHT planning as they don’t consider themselves wealthy. However a vast swathe of people who have a 3/4 bed family home are increasingly dragged into it because property prices are silly. It’s just not true to pretend that this is an isolated trend for London and parts of the South anymore, and I have a feeling a lot of people who have not considered tax planning will see big headlines about IHT and clock/have their children clock for them that it might be worthwhile

robmatic wrote: Mon Oct 21, 2024 8:56 am

Tichtheid wrote: Mon Oct 21, 2024 7:18 am

robmatic wrote: Mon Oct 21, 2024 4:38 am

I don't think it will make much difference either way beyond a headline and a perception as so few people pay IHT and avoidance levels must already be pretty entrenched with gifting and trusts.

It is also fairly meaningless as a redistributive policy as BOMAD is actually where the socially significant intergenerational wealth transfers are happening, but hey ho.

We used bank of granny to put two children through uni as the way grants and bursaries are set up it really only helps the first child, not the second or third, so our inheritance from grandma went to pay buy to let landlords’ mortgages.

I really resented that, I wouldn’t have resented paying the same amount to the uni for accommodation

In my day, you only got uni accommodation in first year anyway.

That was certainly better for your kids than the maintenance loan. If you are a graduate now, you basically get savaged by the student loan system if you can't pay upfront for the fees and living costs.

Yeah, plus we got a rent allowance and a grant to cover living expenses - the system is way to big for that now of course - but there wasn't the same voracious buy-to-let system back then (it's a personal bugbear of mine)

All three of my offspring have larger students debts now than they did at graduation despite repayments - loans were supposed to be interest-free, not now. The post grad interest rate is 7.3%

Paddington Bear wrote: Mon Oct 21, 2024 9:16 am

Tichtheid wrote: Mon Oct 21, 2024 7:09 am IHT payments will increase as the housing market pushes more estates above the half million pound threshold - that’s a fair amount of tax-free cash.

As things stand you can leave everything to your spouse without tax, you can leave up to £325k to you children without taxation, that threshold increases to £500k if you leave them a house too.

I see that as being a fairly generous allowance - half a million quid tax-free?
There's even a way for a couple to pass on a million quid tax-free, again this involves property as opposed to, say, stocks and shares.

There’s a fair chunk of people who I know don’t really consider themselves to need IHT planning as they don’t consider themselves wealthy. However a vast swathe of people who have a 3/4 bed family home are increasingly dragged into it because property prices are silly. It’s just not true to pretend that this is an isolated trend for London and parts of the South anymore, and I have a feeling a lot of people who have not considered tax planning will see big headlines about IHT and clock/have their children clock for them that it might be worthwhile

I don't know anyone who is claiming it's an issue only for London and the SE. There are large numbers of new houses being built across this county and very few of them at priced at under £350K. It's not a stretch to think that along with a final salary pension scheme, which my generation took for granted, plus savings, the estate will be dragged over the half million pound threshold for IHT.

Having said that, I don't think there is much of a need for tax planning - half a million quid tax free is a sizeable sum and you also get 60p in every pound above that. To be honest I don't know what "planning" could be done anyway, bar giving away money seven years before you peg it

Paddington Bear wrote: Mon Oct 21, 2024 9:16 am

Tichtheid wrote: Mon Oct 21, 2024 7:09 am IHT payments will increase as the housing market pushes more estates above the half million pound threshold - that’s a fair amount of tax-free cash.

As things stand you can leave everything to your spouse without tax, you can leave up to £325k to you children without taxation, that threshold increases to £500k if you leave them a house too.

I see that as being a fairly generous allowance - half a million quid tax-free?
There's even a way for a couple to pass on a million quid tax-free, again this involves property as opposed to, say, stocks and shares.

There’s a fair chunk of people who I know don’t really consider themselves to need IHT planning as they don’t consider themselves wealthy. However a vast swathe of people who have a 3/4 bed family home are increasingly dragged into it because property prices are silly. It’s just not true to pretend that this is an isolated trend for London and parts of the South anymore, and I have a feeling a lot of people who have not considered tax planning will see big headlines about IHT and clock/have their children clock for them that it might be worthwhile

Sounds like a good incentive to get elderly couples to move out of sizeable family homes and into something more modest in their twilight years. Makes more properties available for young families who need the space and the equity can either be spent or do something more productive than be locked up in property waiting to be passed down tax-free to the next generation an indeterminate amount of time in the future.

I'm sceptical about IHT as a tax-raising method but you are selling me on the idea now

Tichtheid wrote: Mon Oct 21, 2024 9:31 am

Paddington Bear wrote: Mon Oct 21, 2024 9:16 am

Tichtheid wrote: Mon Oct 21, 2024 7:09 am IHT payments will increase as the housing market pushes more estates above the half million pound threshold - that’s a fair amount of tax-free cash.

As things stand you can leave everything to your spouse without tax, you can leave up to £325k to you children without taxation, that threshold increases to £500k if you leave them a house too.

I see that as being a fairly generous allowance - half a million quid tax-free?
There's even a way for a couple to pass on a million quid tax-free, again this involves property as opposed to, say, stocks and shares.

There’s a fair chunk of people who I know don’t really consider themselves to need IHT planning as they don’t consider themselves wealthy. However a vast swathe of people who have a 3/4 bed family home are increasingly dragged into it because property prices are silly. It’s just not true to pretend that this is an isolated trend for London and parts of the South anymore, and I have a feeling a lot of people who have not considered tax planning will see big headlines about IHT and clock/have their children clock for them that it might be worthwhile

I don't know anyone who is claiming it's an issue only for London and the SE. There are large numbers of new houses being built across this county and very few of them at priced at under £350K. It's not a stretch to think that along with a final salary pension scheme, which my generation took for granted, plus savings, the estate will be dragged over the half million pound threshold for IHT.

Having said that, I don't think there is much of a need for tax planning - half a million quid tax free is a sizeable sum and you also get 60p in every pound above that. To be honest I don't know what "planning" could be done anyway, bar giving away money seven years before you peg it

That's the thing though, you still get £500k tax free, which is an enormous sum. And then, you still get the majority of everything over the top of that initial half million too. And most of that sum will have been generated from a property, which would have been gaining in value, for little input, over decades, and not have any CGT tax on it etc.

Generational wealth for those that have it, and bugger all for those that don't.

Tichtheid wrote: Mon Oct 21, 2024 9:23 am

robmatic wrote: Mon Oct 21, 2024 8:56 am

Tichtheid wrote: Mon Oct 21, 2024 7:18 am

We used bank of granny to put two children through uni as the way grants and bursaries are set up it really only helps the first child, not the second or third, so our inheritance from grandma went to pay buy to let landlords’ mortgages.

I really resented that, I wouldn’t have resented paying the same amount to the uni for accommodation

In my day, you only got uni accommodation in first year anyway.

That was certainly better for your kids than the maintenance loan. If you are a graduate now, you basically get savaged by the student loan system if you can't pay upfront for the fees and living costs.

Yeah, plus we got a rent allowance and a grant to cover living expenses - the system is way to big for that now of course - but there wasn't the same voracious buy-to-let system back then (it's a personal bugbear of mine)

All three of my offspring have larger students debts now than they did at graduation despite repayments - loans were supposed to be interest-free, not now. The post grad interest rate is 7.3%

The student loans are now basically like a graduate tax, except that if you are a graduate from a well-off family you can avoid it by paying up front and save a ton of money.

robmatic wrote: Mon Oct 21, 2024 9:48 am

Paddington Bear wrote: Mon Oct 21, 2024 9:16 am

Tichtheid wrote: Mon Oct 21, 2024 7:09 am IHT payments will increase as the housing market pushes more estates above the half million pound threshold - that’s a fair amount of tax-free cash.

As things stand you can leave everything to your spouse without tax, you can leave up to £325k to you children without taxation, that threshold increases to £500k if you leave them a house too.

I see that as being a fairly generous allowance - half a million quid tax-free?
There's even a way for a couple to pass on a million quid tax-free, again this involves property as opposed to, say, stocks and shares.

There’s a fair chunk of people who I know don’t really consider themselves to need IHT planning as they don’t consider themselves wealthy. However a vast swathe of people who have a 3/4 bed family home are increasingly dragged into it because property prices are silly. It’s just not true to pretend that this is an isolated trend for London and parts of the South anymore, and I have a feeling a lot of people who have not considered tax planning will see big headlines about IHT and clock/have their children clock for them that it might be worthwhile

Sounds like a good incentive to get elderly couples to move out of sizeable family homes and into something more modest in their twilight years. Makes more properties available for young families who need the space and the equity can either be spent or do something more productive than be locked up in property waiting to be passed down tax-free to the next generation an indeterminate amount of time in the future.

I'm sceptical about IHT as a tax-raising method but you are selling me on the idea now

This would be easier to achieve if we had built any homes, instead you have downsizers competing with 30/40somethings for 3 beds in any decent location. And stamp duty of course massively disincentivises moving.

Anecdote does not = data but I’d say just about all of my parents’ social circle are actively interested in downsizing, but after a scan of the market and realising the cost decided against it. So there’s a lot of couples rattling around family homes.

I also don’t see how raising IHT makes them more likely to move - providing you trust your kids and they have any vague sense of decency you just transfer them half 7 years before you die and your kids inherit something they can flog tax free. Pretty foolproof for most 60 somethings.

robmatic wrote: Mon Oct 21, 2024 9:57 am

Tichtheid wrote: Mon Oct 21, 2024 9:23 am

robmatic wrote: Mon Oct 21, 2024 8:56 am

In my day, you only got uni accommodation in first year anyway.

That was certainly better for your kids than the maintenance loan. If you are a graduate now, you basically get savaged by the student loan system if you can't pay upfront for the fees and living costs.

Yeah, plus we got a rent allowance and a grant to cover living expenses - the system is way to big for that now of course - but there wasn't the same voracious buy-to-let system back then (it's a personal bugbear of mine)

All three of my offspring have larger students debts now than they did at graduation despite repayments - loans were supposed to be interest-free, not now. The post grad interest rate is 7.3%

The student loans are now basically like a graduate tax, except that if you are a graduate from a well-off family you can avoid it by paying up front and save a ton of money.

Must admit I stopped looking at my statements. It’s a tax, it will make my tax rate pretty punitive as and when I get a couple of promotions and/or have kids, it is what it is. Not sure what you do about it, no government is writing them off.

Raggs wrote: Mon Oct 21, 2024 9:48 am

Tichtheid wrote: Mon Oct 21, 2024 9:31 am

Paddington Bear wrote: Mon Oct 21, 2024 9:16 am

There’s a fair chunk of people who I know don’t really consider themselves to need IHT planning as they don’t consider themselves wealthy. However a vast swathe of people who have a 3/4 bed family home are increasingly dragged into it because property prices are silly. It’s just not true to pretend that this is an isolated trend for London and parts of the South anymore, and I have a feeling a lot of people who have not considered tax planning will see big headlines about IHT and clock/have their children clock for them that it might be worthwhile

I don't know anyone who is claiming it's an issue only for London and the SE. There are large numbers of new houses being built across this county and very few of them at priced at under £350K. It's not a stretch to think that along with a final salary pension scheme, which my generation took for granted, plus savings, the estate will be dragged over the half million pound threshold for IHT.

Having said that, I don't think there is much of a need for tax planning - half a million quid tax free is a sizeable sum and you also get 60p in every pound above that. To be honest I don't know what "planning" could be done anyway, bar giving away money seven years before you peg it

That's the thing though, you still get £500k tax free, which is an enormous sum. And then, you still get the majority of everything over the top of that initial half million too. And most of that sum will have been generated from a property, which would have been gaining in value, for little input, over decades, and not have any CGT tax on it etc.

Generational wealth for those that have it, and bugger all for those that don't.

Yes, and the ‘haves’ are a group increasing at an exponential rate unless house prices crash, which is highly unlikely.

Raggs wrote: Mon Oct 21, 2024 9:48 am

Tichtheid wrote: Mon Oct 21, 2024 9:31 am

Paddington Bear wrote: Mon Oct 21, 2024 9:16 am

There’s a fair chunk of people who I know don’t really consider themselves to need IHT planning as they don’t consider themselves wealthy. However a vast swathe of people who have a 3/4 bed family home are increasingly dragged into it because property prices are silly. It’s just not true to pretend that this is an isolated trend for London and parts of the South anymore, and I have a feeling a lot of people who have not considered tax planning will see big headlines about IHT and clock/have their children clock for them that it might be worthwhile

I don't know anyone who is claiming it's an issue only for London and the SE. There are large numbers of new houses being built across this county and very few of them at priced at under £350K. It's not a stretch to think that along with a final salary pension scheme, which my generation took for granted, plus savings, the estate will be dragged over the half million pound threshold for IHT.

Having said that, I don't think there is much of a need for tax planning - half a million quid tax free is a sizeable sum and you also get 60p in every pound above that. To be honest I don't know what "planning" could be done anyway, bar giving away money seven years before you peg it

That's the thing though, you still get £500k tax free, which is an enormous sum. And then, you still get the majority of everything over the top of that initial half million too. And most of that sum will have been generated from a property, which would have been gaining in value, for little input, over decades, and not have any CGT tax on it etc.

Generational wealth for those that have it, and bugger all for those that don't.

Yup, say I leave an estate worth 700K (chance would be a fine thing), my kids would get £620 000 to divvy up between them, for doing nowt.

Paddington Bear wrote: Mon Oct 21, 2024 10:43 am

Raggs wrote: Mon Oct 21, 2024 9:48 am

Tichtheid wrote: Mon Oct 21, 2024 9:31 am

I don't know anyone who is claiming it's an issue only for London and the SE. There are large numbers of new houses being built across this county and very few of them at priced at under £350K. It's not a stretch to think that along with a final salary pension scheme, which my generation took for granted, plus savings, the estate will be dragged over the half million pound threshold for IHT.

Having said that, I don't think there is much of a need for tax planning - half a million quid tax free is a sizeable sum and you also get 60p in every pound above that. To be honest I don't know what "planning" could be done anyway, bar giving away money seven years before you peg it

That's the thing though, you still get £500k tax free, which is an enormous sum. And then, you still get the majority of everything over the top of that initial half million too. And most of that sum will have been generated from a property, which would have been gaining in value, for little input, over decades, and not have any CGT tax on it etc.

Generational wealth for those that have it, and bugger all for those that don't.

Yes, and the ‘haves’ are a group increasing at an exponential rate unless house prices crash, which is highly unlikely.

how do you reckon that when home ownership is falling?

The decline in home ownership has been more pronounced in younger age groups: in 2003/04, 59% of households led by someone aged 25-34 were homeowners. This fell to 41% in 2019/20. Over the same period, the proportion of households led by a 35-44 year old fell from 74% to 56%.

Home ownership has become increasingly difficult to access, particularly for first-time buyers, as house price growth has outstripped the growth in wages. In 2019, the median house price in England was around 7.8 times higher than the median annual earnings of a full-time worker. The ratio has increased from around 5.1 in 2002. In London, the ratio in 2019 was considerably higher at 12.8.

Married with kids and a house?

IHT allowances

2 X Nil Rate Bands - £650k

2 X Residence Nil Rate Bands - £350k

Total Allowances- £1m

Even on an estate of say, £1.6m, the IHT is £240k, an effective tax rate of 15% on the gross value, and leaving £1.36m to divvy up (after costs of sorting the estate out). Even between three kids that's £453k for being born and not falling out with your parents.

Calculon wrote: Mon Oct 21, 2024 12:03 pm

Paddington Bear wrote: Mon Oct 21, 2024 10:43 am

Raggs wrote: Mon Oct 21, 2024 9:48 am

That's the thing though, you still get £500k tax free, which is an enormous sum. And then, you still get the majority of everything over the top of that initial half million too. And most of that sum will have been generated from a property, which would have been gaining in value, for little input, over decades, and not have any CGT tax on it etc.

Generational wealth for those that have it, and bugger all for those that don't.

Yes, and the ‘haves’ are a group increasing at an exponential rate unless house prices crash, which is highly unlikely.

how do you reckon that when home ownership is falling?

The decline in home ownership has been more pronounced in younger age groups: in 2003/04, 59% of households led by someone aged 25-34 were homeowners. This fell to 41% in 2019/20. Over the same period, the proportion of households led by a 35-44 year old fell from 74% to 56%.

Home ownership has become increasingly difficult to access, particularly for first-time buyers, as house price growth has outstripped the growth in wages. In 2019, the median house price in England was around 7.8 times higher than the median annual earnings of a full-time worker. The ratio has increased from around 5.1 in 2002. In London, the ratio in 2019 was considerably higher at 12.8.

Because the people who own homes are dying, fairly obviously

Tichtheid wrote: Mon Oct 21, 2024 7:09 am IHT payments will increase as the housing market pushes more estates above the half million pound threshold - that’s a fair amount of tax-free cash.

As things stand you can leave everything to your spouse without tax, you can leave up to £325k to you children without taxation, that threshold increases to £500k if you leave them a house too.

I see that as being a fairly generous allowance - half a million quid tax-free?
There's even a way for a couple to pass on a million quid tax-free, again this involves property as opposed to, say, stocks and shares.

Yeah, although I think closing the loopholes whereby the largest estates escape IHT would be more profitable imo. As I saw written recently, tax land - you can't move it out of the country to avoid the tax.

Hal Jordan wrote: Mon Oct 21, 2024 12:18 pm Married with kids and a house?

IHT allowances

2 X Nil Rate Bands - £650k

2 X Residence Nil Rate Bands - £350k

Total Allowances- £1m

Even on an estate of say, £1.6m, the IHT is £240k, an effective tax rate of 15% on the gross value, and leaving £1.36m to divvy up (after costs of sorting the estate out). Even between three kids that's £453k for being born and not falling out with your parents.

You don't get to double the residence allowance for a couple

Edit - thought I'd check and seems it's changed very recently. Used to be £225 000 for a couples house, now they £175k each. Slightly odd way to do it imo.

So in summary.

People who will not be affected by IHT think it is a really good idea for other people to pay it.

weegie01 wrote: Mon Oct 21, 2024 8:31 pm So in summary.

People who will not be affected by IHT think it is a really good idea for other people to pay it.

Not really, I think a better summary would be that after getting half a million smackeroonies tax free, getting a further 60% on any more than that doesn’t seem punitive or unfair.
Or in some specific cases, a million pounds tax free before that 40% tax kicks in, that also doesn’t seem punitive or unfair.

Tichtheid wrote: Mon Oct 21, 2024 9:13 pm

weegie01 wrote: Mon Oct 21, 2024 8:31 pm So in summary.

People who will not be affected by IHT think it is a really good idea for other people to pay it.

Not really, I think a better summary would be that after getting half a million smackeroonies tax free, getting a further 60% on any more than that doesn’t seem punitive or unfair.

Or in some specific cases, a million pounds tax free before that 40% tax kicks in, that also doesn’t seem punitive or unfair.

You are talking as if it is a tax on inheritance. Despite the name IHT is a tax on the dead person. The tax is triggered by death, it is assessed on the estate of the dead person, it is paid by the dead person's representatives.

If you can say hand on heart that your happy paying an effective tax rate of near 70% then I'll accept your argument that it is not punitive, though I will beg to differ. Pay a marginal rate of 50% tax and NI, and then will lose another 40% of what was saved when we die. My wife has brought her retirement forward two years precisely because of this calculation. We have all we need, and expect to find it hard to shelter any new money from IHT, so it is just not worth her carrying on working, earning, and paying tax.

We have had pretty successful lives and the Govt wants to take even more of our money when we die on top of all the tax we have already paid along the way. That's a huge disincentive to build wealth. Neither of us inherited anything: we built everything we have ourselves. One of the prime motivators was precisely so could pass that wealth on to our children and grand children so they would have better and easier lives than we did. So we have taken steps to ensure that the wealth we have built goes to the people we built it for.

weegie01 wrote: Mon Oct 21, 2024 10:55 pm

Tichtheid wrote: Mon Oct 21, 2024 9:13 pm

weegie01 wrote: Mon Oct 21, 2024 8:31 pm So in summary.

People who will not be affected by IHT think it is a really good idea for other people to pay it.

Not really, I think a better summary would be that after getting half a million smackeroonies tax free, getting a further 60% on any more than that doesn’t seem punitive or unfair.

Or in some specific cases, a million pounds tax free before that 40% tax kicks in, that also doesn’t seem punitive or unfair.

You are talking as if it is a tax on inheritance. Despite the name IHT is a tax on the dead person. The tax is triggered by death, it is assessed on the estate of the dead person, it is paid by the dead person's representatives.

If you can say hand on heart that your happy paying an effective tax rate of near 70% then I'll accept your argument that it is not punitive, though I will beg to differ. Pay a marginal rate of 50% tax and NI, and then will lose another 40% of what was saved when we die. My wife has brought her retirement forward two years precisely because of this calculation. We have all we need, and expect to find it hard to shelter any new money from IHT, so it is just not worth her carrying on working, earning, and paying tax.

We have had pretty successful lives and the Govt wants to take even more of our money when we die on top of all the tax we have already paid along the way. That's a huge disincentive to build wealth. Neither of us inherited anything: we built everything we have ourselves. One of the prime motivators was precisely so could pass that wealth on to our children and grand children so they would have better and easier lives than we did. So we have taken steps to ensure that the wealth we have built goes to the people we built it for.

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.

I don't have much expectation of IHT raising much money, because as discussed it is easy to avoid, but in terms of fairness it is probably correct if the government is trying to shift the tax burden in that direction. If you are a young working person in the UK:

1) Your marginal tax rates are punitive because of the student loan system. It is an extra 9%, or 15% if you have a Master's degree.
2) More of your income is getting taxed because of all the fiscal drag in the last decade.
3) It is much more difficult to acquire property wealth because of the high prices. Property ownership rates are declining as a result.
4) It is also more difficult to build up wealth in the form of a pension because of the demise of the final salary pension model.

Something needs to be done to level the playing field.

It's the same here in Oz where renters are almost perpetually locked out of home-ownership now.

weegie01 wrote: Mon Oct 21, 2024 10:55 pm

Tichtheid wrote: Mon Oct 21, 2024 9:13 pm

weegie01 wrote: Mon Oct 21, 2024 8:31 pm So in summary.

People who will not be affected by IHT think it is a really good idea for other people to pay it.

Not really, I think a better summary would be that after getting half a million smackeroonies tax free, getting a further 60% on any more than that doesn’t seem punitive or unfair.

Or in some specific cases, a million pounds tax free before that 40% tax kicks in, that also doesn’t seem punitive or unfair.

You are talking as if it is a tax on inheritance. Despite the name IHT is a tax on the dead person. The tax is triggered by death, it is assessed on the estate of the dead person, it is paid by the dead person's representatives.

If you can say hand on heart that your happy paying an effective tax rate of near 70% then I'll accept your argument that it is not punitive, though I will beg to differ. Pay a marginal rate of 50% tax and NI, and then will lose another 40% of what was saved when we die. My wife has brought her retirement forward two years precisely because of this calculation. We have all we need, and expect to find it hard to shelter any new money from IHT, so it is just not worth her carrying on working, earning, and paying tax.

We have had pretty successful lives and the Govt wants to take even more of our money when we die on top of all the tax we have already paid along the way. That's a huge disincentive to build wealth. Neither of us inherited anything: we built everything we have ourselves. One of the prime motivators was precisely so could pass that wealth on to our children and grand children so they would have better and easier lives than we did. So we have taken steps to ensure that the wealth we have built goes to the people we built it for.

How much of your IHT will be from property? Because you didn't earn the increase in property prices. There's a lot of people who seem to think they're smart because they got big price increases on their hone. That just happened, you didn't earn it. Unearned income should be taxed higher.

Biffer wrote: Tue Oct 22, 2024 5:37 am

weegie01 wrote: Mon Oct 21, 2024 10:55 pm

Tichtheid wrote: Mon Oct 21, 2024 9:13 pm

Not really, I think a better summary would be that after getting half a million smackeroonies tax free, getting a further 60% on any more than that doesn’t seem punitive or unfair.

Or in some specific cases, a million pounds tax free before that 40% tax kicks in, that also doesn’t seem punitive or unfair.

You are talking as if it is a tax on inheritance. Despite the name IHT is a tax on the dead person. The tax is triggered by death, it is assessed on the estate of the dead person, it is paid by the dead person's representatives.

If you can say hand on heart that your happy paying an effective tax rate of near 70% then I'll accept your argument that it is not punitive, though I will beg to differ. Pay a marginal rate of 50% tax and NI, and then will lose another 40% of what was saved when we die. My wife has brought her retirement forward two years precisely because of this calculation. We have all we need, and expect to find it hard to shelter any new money from IHT, so it is just not worth her carrying on working, earning, and paying tax.

We have had pretty successful lives and the Govt wants to take even more of our money when we die on top of all the tax we have already paid along the way. That's a huge disincentive to build wealth. Neither of us inherited anything: we built everything we have ourselves. One of the prime motivators was precisely so could pass that wealth on to our children and grand children so they would have better and easier lives than we did. So we have taken steps to ensure that the wealth we have built goes to the people we built it for.

How much of your IHT will be from property? Because you didn't earn the increase in property prices. There's a lot of people who seem to think they're smart because they got big price increases on their hone. That just happened, you didn't earn it. Unearned income should be taxed higher.

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!

As someone whose estate will be subject to IHT and having dealt with my brothers estate I know that for soooo many people their wealth will be spunked away by ungrateful little shits. So what the fuck was the point?

Biffer wrote: Tue Oct 22, 2024 5:37 am How much of your IHT will be from property? Because you didn't earn the increase in property prices. There's a lot of people who seem to think they're smart because they got big price increases on their hone. That just happened, you didn't earn it. Unearned income should be taxed higher.

Some, but the overwhelming amount is money we have earned, paid tax on and either invested or used to set up businesses. The wealth creation that is supposed to be a good thing.

I have no issue with unearned income on rising house prices being taxed. So remove the CGT exemption on homes so this unearned profit from the increase in property prices is paid by those who benefit. I am perfectly happy to take that pain if everyone else does as well

Tichtheid wrote: Mon Oct 21, 2024 11:43 pm
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.

dpedin wrote: Tue Oct 22, 2024 6:43 amYou 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

Excellent post Sir.

epwc wrote: Tue Oct 22, 2024 6:55 am As someone whose estate will be subject to IHT and having dealt with my brothers estate I know that for soooo many people their wealth will be spunked away by ungrateful little shits. So what the fuck was the point?

We are all too aware of this.

But our sons have taken the security of knowing they were going to inherit decent sums to take risks and set up businesses. A remarkable number of their peers have done likewise. I am sure some would have done so anyway but this country is poor at funding start ups, compared to the US as an example. I am quite sure many would not have done so without their parents wealth backing them due to funding difficulties.

Some will see that as inter generational wealth unfairly tipping the balance and there is merit to that. However what it has also done is allow young people to set up businesses and employ people at a higher rate then would otherwise have been the case.

epwc wrote: Tue Oct 22, 2024 6:55 am As someone whose estate will be subject to IHT and having dealt with my brothers estate I know that for soooo many people their wealth will be spunked away by ungrateful little shits. So what the fuck was the point?

This is the old joke about IHT being a voluntary levy on those who trust their children less than they trust the taxman.

Every case is individual, however *for the vast majority* of people who are likely inheritance beneficiaries of rising property prices the money is likely to go straight into their own property rather than be spunked on travel or a fast car etc.

The reason for this is obvious - house prices have got so out of control that if you don’t have some sort of family support buying anything that would have resembled a middle class family home in the South has become pretty much inaccessible.

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). Most parents want to help their kids alleviate that to the extent they can, its both a natural instinct and I don’t think necessarily falls nicely into the morality play that IHT debates can become.

And sure, the better option for a society is to build loads of homes but let’s be realistic about that

I don’t think home ownership should be the norm, but this would mean some kind of rent controls and a population that invests more in retirement

Which like mega house building isn’t going to happen

weegie01 wrote: Tue Oct 22, 2024 7:46 am
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?

I don't think this argument will get a lot of sympathy when marginal tax rates on income can hit 70% for people entering the workforce now.

When I earned £23k as a worker starting out in the UK nearly 30 years ago, lager cost £1.80 a pint. And no-one had a student loan to pay off.

Today the minimum wage as a salary is almost £25k - a lager costs £6 a pint.

No wonder Millennials don't go to the pub any more.

Wages have been completely out-stripped by inflation.

weegie01 wrote: Tue Oct 22, 2024 7:58 am 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.

will no one think of the wealthy!

Paddington Bear wrote: Tue Oct 22, 2024 9:06 amAgain 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).

_Os_ wrote: Tue Oct 22, 2024 9:53 am

Paddington Bear wrote: Tue Oct 22, 2024 9:06 amAgain 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.

weegie01 wrote: Tue Oct 22, 2024 7:46 am

Tichtheid wrote: Mon Oct 21, 2024 11:43 pm
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.