Taxing the rich to pay for the poor

GSM, of course I don't expect a receipt from a window cleaner, what a silly comment. I pay online. If I employ a tradesperson for a large job, such as the decorator, I pay the itemised invoice for materials and labour and vat. Quite simple really.

You don't have to be wealthy to enjoy the benefit of a gift falling outside IHT if you survive for seven years. It applies to everyone, whether they give £100 or £1m.

You also don't have to be wealthy to escape IHT on the transfer of a business when you die - it can be an extremely modest business.

And you don't have to be wealthy to guarantee a loan either, though that has nothing to do with tax avoidance.

Do you have any examples which benefit only the wealthy?

The central question is who are the rich?
Are they the billionaires or are they the people who have worked all their lives and managed to accumulate for themselves a comfortable life? So they own a house, sometimes they own two judging by the things many GNetters say. Many GNetters appear to have a holiday home as well as a main home. Are they the rich? Or are the people who have paid into a pension all their lives and retired with a state pension and a private pension, are they the rich? There aren’t too many billionaires, or even millionaires and so the rich must be those who are not dependent on state benefits. That’s a lot of people who I wouldn’t describe as rich but who could fall into that group. I’d like to know who are the rich?

You can ask until you’re blue in the face, maddy, as I have - you won’t get an answer.

Rich people are people who have more money than oneself! Hence everyone's happy to hear that rich people will be taxed as they don't think it applies to them!

I know GSM, but I hope someone can tell me. The problem is that there just aren’t enough really rich people to make much difference. Not even that many people who earn £200,000 plus. The numbers aren’t enough to produce the amount needed. I don’t fall into the category of being rich. I jointly own one house, and I have a state pension and a small teacher’s pension but I probably would need to fall into the category of being rich if any worthwhile taxes are going to be raised. That’s the point, there aren’t enough really rich people around and so tax rises must come from ordinary people who are above claiming benefits level, but not in any way rich.

rich people are people who have more money than oneself

That probably describes it Aveline

I think Aveline has the answer!

maddyone

The central question is who are the rich?
Are they the billionaires or are they the people who have worked all their lives and managed to accumulate for themselves a comfortable life? So they own a house, sometimes they own two judging by the things many GNetters say. Many GNetters appear to have a holiday home as well as a main home. Are they the rich? Or are the people who have paid into a pension all their lives and retired with a state pension and a private pension, are they the rich? There aren’t too many billionaires, or even millionaires and so the rich must be those who are not dependent on state benefits. That’s a lot of people who I wouldn’t describe as rich but who could fall into that group. I’d like to know ^who are the rich? ^

I’d like to know who are the rich?

Well as they are referred to as the 1% there can't be too many of them I assume. I certainly don't think they include those described in your second paragraph, and they might not think they are rich either by comparison. Personally I never think of them as rich.

A member of my own family owns 2 houses because he made a shrewd investment - but he does all the repairs himself because he's also a handy-man, and drives a modest second-hand car and doesn't think he's rich. Obviously compared to someone on a very low wage - he is... but that's by comparison.

Who springs to mind when the question is asked? To me, Bezoz and the late Epstein - those who own islands, yachts, fortresses, multi-properties around the world. But they are few, I think.

There are apparently 55 billionaires in the UK wether they are tax No 2 is Jim Ratcliffe who pays tax in Monaco not UK, the others I havn’t looked, if you have that much you can choose where you pay tax.
James Dyson moved to Singapore he still owns estates in UK but I bet they are not profit making.

Ratcliffe has lived in Monaco since 2020.

James Dyson paid £156m UK tax last year. He lives in the UK, not in Singapore.

You really should do some proper research before coming out with these misleading statements. It’s not difficult.

There are plenty of rich people around and plenty of ways of sheltering wealth from the tax man if your income exceeds your necessary expenditure. Give your house to your children or grandchildren, pay them the market rent out of income and continue to live in it until you die great way to start a trust fund or pay boarding school fees.Establish how much you spend annually and any amount over that can be given away. Give gifts of cash up to £3k to your chosen people on an annual basis, this can come from capital. Use capital to buy agricultural land, don't even need to farm it yourself as you can rent it out, follow the rules and it can be 100% free of inheritance tax. Best rule is, give lots away and hope to die later than 7 years on, so early tax planning is the best policy. Set up a limited liability partnership with your children, buy half a dozen properties and let your kids draw down dividends as and when needed, you don't have to take anything from the business. I'm sure there's lots of other legitimate ways to pass on money but you do need to be "rich" enough to do that without spoiling your own living standards.

You also need to keep in mind that if you need care, a claim of deliberate deprivation of assets may come into play.

foxie but as I said upthread, what does rich mean? Who is rich? How much does a person need to have to be called rich?
We recently paid for our six year old grandson to have surgery he needed privately in New Zealand rather than have him wait two years - waiting lists are long in NZ too, and their health care has many of the same problems that our NHS suffers from. Does that make me, an ex teacher, married to an ex teacher, rich? I can assure anyone who thinks we are rich, that we are not. But we are comfortable, considering that we can afford the life style we want, but that is certainly not ostentatious. No expensive hobbies, a very normal house, but we enjoy our holidays and annual trip to NZ.

David49

There are apparently 55 billionaires in the UK wether they are tax No 2 is Jim Ratcliffe who pays tax in Monaco not UK, the others I havn’t looked, if you have that much you can choose where you pay tax.
James Dyson moved to Singapore he still owns estates in UK but I bet they are not profit making.

I thought Dyson moved back to the UK in 2021?

... and has paid £millions in tax. I think he was on the Times' top-taxpayers list (or whatever it's called) at some point?

Hmm, well I could look it up.

I suppose someone wise needs to draw up a plan, inclusive of home value(s), land value(s), pension values, savings, dividend producing assets, etc, (all assets) - against debt to support all assets. Everyone fill in such a convoluted form. The wise person would have decided bands - the top being "rich".

Somehow, with all this knowledge, someone could work out a tax plan. Then people could squabble endlessly over the results.

Apologies re the Dyson post. The point's already been made.

I should have RTFT.

And yes, he's on the The Times' Top Taxpayers list. Currently even.

Seems he’s moved his family tax back to UK, company stays in Far East, perhaps the climate didnt suit him.

If we’re talking billionaires then there simply aren’t enough to pay more taxes to make much difference. If more taxes are to be paid, ordinary people will have to pay them. There aren’t enough rich people!

Germanshepherdsmum

You don't have to be wealthy to enjoy the benefit of a gift falling outside IHT if you survive for seven years. It applies to everyone, whether they give £100 or £1m.

You also don't have to be wealthy to escape IHT on the transfer of a business when you die - it can be an extremely modest business.

And you don't have to be wealthy to guarantee a loan either, though that has nothing to do with tax avoidance.

Do you have any examples which benefit only the wealthy?

It’s simple, unless you are wealthy you can’t take advantage of those, your wealth is tied up in your house and probably pension.
Most are not daft enough to risk the house.

Depends on what you define as ‘wealthy’, doesn’t it? You don’t seem to have understood my post at all.

This morning J Vine referred to a friend who bought a house in Notting Hill in the 90s for £1m (I think) and sold it some years later for £38m.

One reason for the house prices in London and other desirable locations is the influx of foreign buyers. If you are a billionaire do you really care whether you pay over the odds for a house that you will possibly not use very often.

You can find articles on line about the state of houses in Bishop's Avenue in Hampstead. One of the most expensive streets in London has houses which are unoccupied and now derelict.

Parents of foreign students are buying properties for their children and this has also pushed prices above and beyond the price that locals can afford.

Prices went up in the 80s following changes to MIRAS. This was introduced in the mid 70s to enable low income earners to buy a house. Previously, tax relief was given on all loans but some people were unable to claim all the relief because their income was too low. So someone paying tax at 83% would benefit from huge tax savings.

The ceiling for MIRAS was £25k. In 1983 Geoffrey Howe increased this to £30k. unmarried couples could pool their allowances to £60k. That would buy a decent house in London.

In the March 1988 Budget Nigel Lawson announced that the option to pool would be abolished that August. I remember discussing this with colleagues and thinking it was a stupid idea to delay the abolition and Lawson admitted regret at not having implemented the change at the Budget date. It is accepted that this fuelled house price rises.

Another way in which some people were able to get full tax relief on their mortage interest was used by many partners in professional firms. You may be aware that partners are entitled to a share of the p'ship profits. They usually take a quarterly draw throughout the year and the balance of their profit share for one year in the following year. It could harm the cash flow of the business if they took their profit shares early. Instead, they borrowed money to put into the business - tax relief in full on that interest - and withdrew an equal sum which they could use to buy their new home.

The above reasons have contributed to the huge increase in house prices. No doubt some of you on here will have benefited one way or another.

I remember MIRAS and, like all homeowners I have benefited from house price inflation, though when buying another house of course I had to pay the inflated price, and I expect we will move yet again. I was not a partner in a firm which managed its cash flow and partner profit shares in the way you describe, though.

Private pensions aren't included in IHT.

I wonder how many who criticises the 'wealthy' for legal tax avoidance, would pass on what they can to their children to avoid paying care fees. Property for example, ensuring their children's inheritance is protected.

No one benefits from house prices rising if they live in their house. What possible benefit is there that a house has risen in value if it’s the only house you own and you live in it? If you live long enough to require care, then the state benefits, because the house will be sold to pay for your care, so the state doesn’t need to pay for it. If you never need care, your children will benefit when the house is sold, but by the time they benefit, they are likely to be established and not need the money.