Non spiky Politics 2

Smileless2012

TBH I'm more impressed with AB than I thought but staggered that he wants to reintroduce alcohol consumption at football matches.

There does appear to be a feeling of hope that was sadly lacking under KS or is that just me .

This is my first time on the Cafe forum and I see this is the second thread for 'Non Spiky Politics'. Great idea and to quote
Arny I'll be back .

They sell alcohol on our football ground! I don’t get what he means. Does he mean you can take your own booze into the grounds? If he does, it’s a daft idea!
No I can’t bare to watch him, I wish they had kept Starmer, might have had a chance of getting them out in the next election.
He wasn’t voted in, his back benchers were all too faced towards KS.
RR ‘oh my friend Andy’ we have been friends for 17 yrs ha, lost her place. Where is she now, back in accounts? 😂

It is perfectly legal to give money away as long as you live for 7 years after the gift. however if you die before 7 years the whole amount is (no tapering) is put back into your estate and IHT is assessed first on that. It's quite complicated as it can leave those that were gifted money with a tax bill if you don't live for 7 years and they need to understand that.

It's quite complicated as it can leave those that were gifted money with a tax bill if you don't live for 7 years and they need to understand that.

That's a risk both the gifter and the gifteee just have to take, isn't it?

MaizieD … if people want to leave their heirs something to get them onto the housing ladder, why don't they do it when they are still alive?

Meandrogrog [if] assets are tied up in property, premium bonds, isa etc, so not easy to give whilst still alive.

The Tories are proposing two changes:

First, replacing the £325k and £175k with one simple £500,000 nil rate band – £1m per married couple.

Second, no inheritance tax at all on a main home passed to children or grandchildren, with (it seems) no cap on the value.

(Source Dan Neidle Tax Policy Associates)

taxpolicy.org.uk/2026/10/08/conservatives-inheritance-tax-family-home-cost/

Read the dynamic effects that Neidle describes in his paper.

About 40,000 to 50,000 older owners in England downsize each year, releasing £5bn to £7bn.

This is effectively money that could be or is being used to help their families but … we know that if people die within seven years of making gifts in excess of £3,000 per year then there will be Inheritance Tax to pay.

.. someone who doesn’t downsize at 75 will usually stay put until they die, so the effect builds up. After ten years it could be in the region of 30,000 to 40,000 family-sized homes occupied by people who would otherwise have moved.

In other words, this policy would be a disincentive for people to downsize in order to help their family sooner rather than later as well as increasing the log jam in the housing market.

foxie48

It is perfectly legal to give money away as long as you live for 7 years after the gift. however if you die before 7 years the whole amount is (no tapering) is put back into your estate and IHT is assessed first on that. It's quite complicated as it can leave those that were gifted money with a tax bill if you don't live for 7 years and they need to understand that.

The £3,000 annual IHT gift exemption has been in place since 1981. 45 years and no increase at all.

Is that limit something that should be increased?

MaizieD

^It's quite complicated as it can leave those that were gifted money with a tax bill if you don't live for 7 years and they need to understand that.^

That's a risk both the gifter and the gifteee just have to take, isn't it?

Well not entirely, the gifter can add a clause in their will that protects the giftee from being responsible for any tax should the gifter not live for 7 years but that only works if there is money still left in the estate to cover the charge. This is all very close to home ATM as my OH is an executor of a relative's estate which is proving to be full of complications, including this one!

JenniRen 11:39

Absolutely yes!!!!

May we celebrate a political win on this Thread?

foxie48

MaizieD

It's quite complicated as it can leave those that were gifted money with a tax bill if you don't live for 7 years and they need to understand that.

That's a risk both the gifter and the gifteee just have to take, isn't it?

Well not entirely, the gifter can add a clause in their will that protects the giftee from being responsible for any tax should the gifter not live for 7 years but that only works if there is money still left in the estate to cover the charge. This is all very close to home ATM as my OH is an executor of a relative's estate which is proving to be full of complications, including this one!

www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14612

For clarification if a donor dies before 7yrs the Gift does come back into the estate and IHT is liable at a reduced rate after 3 yrs
In effect tax due on the gift reduces by 20% each year after 3 yrs

FriedGreenTomatoes2

^can anyone give me a rational explanation as to why someone working and earning pays tax, but someone gifted a whole load of money having not got out of bed for it, doesn’t pay a brass farthing?^

Could it be that it’s because those savings etc had/have already paid tax on them when originally earned? Yes I get your point that any inherited money (I’ve never had any so just an observation here) just drops into the laps of some lucky people but I dare say back in the day when it belonged to the person who earned it, all relevant deductions were made at that time?

Agreed. Taxes have been paid on inheritance.

No they haven’t.

Most of the property wealth that people have “acquired” by the time they die will be a result of inflation; the house someone bought for £50,000 40 years ago that’s now worth say £700,000.

They did not work for that money. It's a result of (mostly) demand pull inflation.

It’s one of the jobs of taxation to control inflation and that’s what IHT does in this circumstance.

Taxes have been paid on inheritance.

I would add to Graphite's point about house price inflation to reiterate the point I made earlier.

There is, as far as I'm aware, absolutely no rule that says a sum of money can only be taxed once. There wouldn't be any money if the state hadn't created it (or allowed it to be created by banks under licence) and as such, the state is absolutely entitled to tax it as often as it likes to prevent inflation. Or to ensure a more equable distribution of it.

That it's already been taxed is a specious argument.

David49

foxie48

MaizieD

It's quite complicated as it can leave those that were gifted money with a tax bill if you don't live for 7 years and they need to understand that.

That's a risk both the gifter and the gifteee just have to take, isn't it?

Well not entirely, the gifter can add a clause in their will that protects the giftee from being responsible for any tax should the gifter not live for 7 years but that only works if there is money still left in the estate to cover the charge. This is all very close to home ATM as my OH is an executor of a relative's estate which is proving to be full of complications, including this one!

www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14612

For clarification if a donor dies before 7yrs the Gift does come back into the estate and IHT is liable at a reduced rate after 3 yrs
In effect tax due on the gift reduces by 20% each year after 3 yrs

Not necessarily, I have taken this from the "Fidelity" website as it explains it better than I can.

"The key thing to remember is that taper relief only applies to Inheritance Tax due on gifts that exceed the available nil-rate band and were made more than three years before death.

So, if a gift falls below the nil-rate band and becomes a failed gift, it actually reduces your nil-rate band.

For example, if you make a gift of £100,000 and this becomes a failed gift, this £100,000 is taken off your nil-rate band (£325,000). This means you now only have a nil-rate band of £225,000.

Taking another example, if you gifted £500,000 just over five years before your death, then £325,000 of that would automatically use up your nil-rate band (leaving none left for the rest of your estate). The remaining £175,000 would face the tapered IHT rate of 16%. Remember, the value of your estate over the nil-rate band will be charged IHT at the full 40% rate."

It is quite complicated to understand but don't assume that a gift automatically attracts tapering because it doesn't if you don't live for the required 7 years. A "failed gift" is one where the gifter does not live for 7 years. The whole amount gifted comes back into your estate and is considered before anything else, the first £325K will wipe out your tax free amount and the remainder will attract tapering. It's also of note that unless there's a clause in the will stating that any tax will be paid from the estate, it is the giftee who is responsible for any additional tax.

Oreo

I also agree with Kemi Badenoch about scrapping Inheritance Tax for family houses.
It’s set at a ridiculous £500,000 at the moment, a modest three bedroom house or bungalow in the South East!
Is that real wealth, I don’t think so.

I agree.

I don't believe homes are wealth, rather a place to live.

foxie48

It is perfectly legal to give money away as long as you live for 7 years after the gift. however if you die before 7 years the whole amount is (no tapering) is put back into your estate and IHT is assessed first on that. It's quite complicated as it can leave those that were gifted money with a tax bill if you don't live for 7 years and they need to understand that.

Incorrect.

A fixed sum can be donated annually which is permanently excluded from IHT.

There is taper relief on larger amounts, after year 3.

www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14612

Nope correct, You can give up to £3K annually free of any tax. You can give any amount from income which you can demonstrate is not needed for your own use, the important thing is that it's from income and usually HMRC prefer it to be a regular gift, not a one off ie we give monthly amounts but any amount given from eg savings rather than income comes under a different rule. For gifts not made from income which are outside the £3K you must live for 7 years for the amount to be free of IHT, short of the 7 years, tapering only comes into effect if the amount gifted is over the personal allowance which is ATM £325K, then tapering begins on gifts that were given over 3 years before the death. Butterjam OH is currently dealing with an estate and is seeing the consequences of this common misunderstanding via a big IHT bill and yes, he is dealing with extremely professional solicitors experienced in probate.

This is from the govt wesite and explains it better than I can. the thing to notice is the £325K threshold is wiped out by the gift to Sally's sister, so the £100K to a friend is subject to tapering and the rest of Sally's estate is taxed fully at 40%

Sally died on 1 July 2022. She was not married or in a civil partnership when she died.

She gave 3 gifts in the 9 years before her death:

£50,000 to her brother 9 years before her death
£325,000 to her sister 4 years and 2 months before her death
£100,000 to her friend 3 years before her death

There’s no Inheritance Tax to pay on the £50,000 gift to her brother as it was given more than 7 years before she died.

There’s also no Inheritance Tax to pay on the £325,000 she gave her sister, as this is within the Inheritance Tax threshold.

But her friend must pay Inheritance Tax on her £100,000 gift at a rate of 32%, as it’s above the tax-free threshold and was given 3 years before Sally died. The Inheritance Tax due is £32,000.

Sally’s remaining estate was valued at £400,000, so the estate would pay Inheritance Tax of 40% on £400,000 (£160,000).

Read further guidance on when a gift counts towards the estate’s

You can give any amount from income which you can demonstrate is not needed for your own use, the important thing is that it's from income and usually HMRC prefer it to be a regular gift, not a one off ie we give monthly amounts but any amount given from eg savings rather than income comes under a different rule.

By income, presumably they mean salary or pension and not, for example, winnings from Premium Bonds?

If you won a substantial amount, could you give some to your children and it be counted as income therefore exempt?
The occasion has never arisen, not yet anyway. But we live in hope.

Can I recommend listening to the Prime Minister on “Leading” The Rest is Politics podcast. I am halfway through and am beginning to get a sense of the man and his politics.

JenniRen

^You can give any amount from income which you can demonstrate is not needed for your own use, the important thing is that it's from income and usually HMRC prefer it to be a regular gift, not a one off ie we give monthly amounts but any amount given from eg savings rather than income comes under a different rule.^

By income, presumably they mean salary or pension and not, for example, winnings from Premium Bonds?

If you won a substantial amount, could you give some to your children and it be counted as income therefore exempt?
The occasion has never arisen, not yet anyway. But we live in hope.

Sadly not, JenniRen it counts as capital but you can give it away under the 7 year rule and hope to live for another 7 years which is better than just passing it on when you die. I've only harped on about the 7 year gifting rule because there's so much misunderstanding of how it works, it's still worth doing especially if you've got lots to give away but basically if you don't live for 7 years it is only the amount left after the basic allowance of £325K that is tapered, whereas if you manage to live long enough the whole amount is discounted from your estate and remains tax free.

Thanks, foxie38
Not that either is likely so I'll spend my winnings on myself this month ( two winter jumpers!)

By Jove! It’s complicated isn’t it? Thanks to all who have set out the interesting facts around the money gifts.

By Jove it's great to hear (read).
By Jove again! Great phrase.

It’s a family favourite saying Aveline due to my late Dad saying it a lot.
He was a fan of Ken Dodd😁
By Jove! What a beautiful day for filling your tights with feathers and saying that tickles my fancy.

I was in a M&S changing room once and heard from the next cubicle 'By Jove you fill a blouse Ella!'. Unfortunately I never managed to catch sight of the magnificent Ella.