Why are so many people against a tax they will never pay?

Because many, many more ordinary people will be dragged into paying inheritance tax over the next few years due to the rise in house prices.

I thought house prices had started to fall.

Perhaps some people are concerned about an unjust tax, even when it is unlikely to affect them.

Mainly because they are being conned by the very well off lobby that stands to gain massively from no IHT. It would be easy to adjust the threshold annually so that ordinary people with houses rising in value did not pay.

Because ever since Thatcher, we've been told that taxation is bad and that we should keep more of our own money. We have also been led to believe that we can have Scandinavian-level services with US-level taxes. [hides-head-in-hands emoji]

Ilovecheese

I thought house prices had started to fall.

If someone bought a house twenty years ago, despite recent small falls in prices, the house would still rise in value substantially. Ordinary people who have little besides their house and some not very great savings, and who have worked all their lives and paid tax on everything they’ve earned are being pulled into paying inheritance tax. Particularly if those people live in the south.

maddyone

Because many, many more ordinary people will be dragged into paying inheritance tax over the next few years due to the rise in house prices.

It is not the owners of the houses that will pay IHT. They will be dead and buried. It is their estate that will pay. They won't lose out and won't be around to see it.

Surely it is better that the living pay less income tax on their earnings, and pay IHT on assets that they've inherited and not earned?

maddyone

Ilovecheese

I thought house prices had started to fall.

If someone bought a house twenty years ago, despite recent small falls in prices, the house would still rise in value substantially. Ordinary people who have little besides their house and some not very great savings, and who have worked all their lives and paid tax on everything they’ve earned are being pulled into paying inheritance tax. Particularly if those people live in the south.

We bought a house in London in 1979 for the cost of £18,500. Today it is worth between £1.25 and £1.5 million. Our mortgage was £15,000 or thereabouts. Had we stayed in that house we would be living in something that cost us around £27,000 (including renovation costs - it was a wreck) A nice big profit for which we would have done little, after the renovation was complete, other than redecorate and maybe replace kitchen and bathroom. Not much over a period of 40 or so years!

As it happened we moved to the countryside and then to France. In both instances prices do not match London so our worth has gone done substantially.

eazybee

Perhaps some people are concerned about an unjust tax, even when it is unlikely to affect them.

This.

DinahMo And most people are also not selfish enough to not be bothered that their offspring will lose a lot of money.

Of course it’s the dependents who inherit who benefit from the inheritance, but the estate pays the tax, and therefore the deceased pay the tax, just when they’re dead. And no, I don’t agree. Why should further tax be paid on really very modest estates when every penny used to buy those houses had tax paid at source? The reason that more and more ordinary people are having their estates subject to inheritance tax is purely because houses have increased in value. Very ordinary houses at that, semi detached and even terraced houses in some areas. Ordinary working people get little enough from the state these days, it’s totally wrong that the level at which inheritance tax is paid has been held down for so many years that is the problem.

Indeed fancythat. Any money I may have left when I die, I want my children to have, because I worked for it. I don’t want it thrown into the coffers of government to be wasted on Lord knows what. I worked for it, I earned it, I paid tax on it, it’s mine! Not the government’s.

Ilovecheese

I thought house prices had started to fall.

Prices have soften and in some less popular areas have fallen a little, but not as much as they shot up. It's really a case of them not going up so quickly.

eazybee

Perhaps some people are concerned about an unjust tax, even when it is unlikely to affect them.

What do you think they find unjust? It's obviously good that they think of others but we all pay tranactional taxes every day. Why do you think that they find this so different.

My point is that you didn't work for it. Look at my example. It's one that applies to many people in the south. At a valuation of £.125 million and a cost of £27,000 that house was worth 46 times the amount we paid for it. What did we do to earn that enormous increase. Not a lot.

Maddyone you paid tax on your earnings. You have not paid tax on any increase in the value of your home. You worked hard to pay off your mortgage. But it's only the interest that counts, not the capital. That is/was just another form of saving.

This is one of the reasons why young people cannot afford to buy a home at all. We bought or home when we 30 having paid rent for 11 years. Nowadays many young people have to wait beyond 30 in order to buy.

fancythat

eazybee

Perhaps some people are concerned about an unjust tax, even when it is unlikely to affect them.

This.

DinahMo And most people are also not selfish enough to not be bothered that their offspring will lose a lot of money.

Only if they are part of the 7% club.

If people leave the family home to their children then the threshold for IHT is £500k. I would have thought that would exceed the value of many modest homes in the south.

There are many ways in which IHT can be mitigated - downsizing for example and then using the cash raised to take full use of the various exemptions.

One change that might make it feel "fairer", would be to tax the amounts received and not the estate. In fact it seems odd that they don't.

The net estate is distributed in accordance with the will of the deceased. The will may provide for a gift to be made free of tax. In any event if beneficiaries received different net proportions that is the same as if they received the gross amount and were then taxed. ie £1 million gross in the proportion 10%, 40% and 50% the amounts would be £100k, £400k and £500k. If it was taxed, say at 40% the net would £600k. The distributions would be £60k, £240k and £300k.

The govt wants its money and it would be problematic if the beneficiaries were paid out of the untaxed estate.

I am totally against IHT

We are in the process of making new wills and will do everything and anything which is legal in order to lessen the ^sledge hammer^of IHT.

I don't mean this to sound insensitive, but the more I inherited over the threshold, the more I felt inclined to just pay the flipping tax and get on with life. My mother gifted us a house in London when we married, but as she died soon after, I, the recipient of the gift needed to pay Inheritance Tax on the value of the gift above the nil rate band. I also paid tax on her own property that I later sold. She had worked all her life as a teacher and paid her taxes too, never received a pension, so was clobbered for tax all round if you like. It made me feel disillusioned, but because I was young, I just accepted it and paid.
In my own life, my husband and I have played the property market and taken risks. Sometimes you win, sometimes you lose, but I now feel that anything I own, either by luck or hard work, is mine, mine alone to do what I like with, and I don't see why the government should get any of it.

Joseanne 👏👏👏

Dinahmo

The net estate is distributed in accordance with the will of the deceased. The will may provide for a gift to be made free of tax. In any event if beneficiaries received different net proportions that is the same as if they received the gross amount and were then taxed. ie £1 million gross in the proportion 10%, 40% and 50% the amounts would be £100k, £400k and £500k. If it was taxed, say at 40% the net would £600k. The distributions would be £60k, £240k and £300k.

The govt wants its money and it would be problematic if the beneficiaries were paid out of the untaxed estate.

Thanks Dinahmo. Obviously the taxes must be paid, but it was more the "feel" I was thinking about, ie., stopping people thinking dead people pay taxes. Also, if you go down the path of simplifying taxes (I would) you would then tax the inheritance as additional income - just as all unearned income should be.

Dinahmo

maddyone

Ilovecheese

I thought house prices had started to fall.

If someone bought a house twenty years ago, despite recent small falls in prices, the house would still rise in value substantially. Ordinary people who have little besides their house and some not very great savings, and who have worked all their lives and paid tax on everything they’ve earned are being pulled into paying inheritance tax. Particularly if those people live in the south.

We bought a house in London in 1979 for the cost of £18,500. Today it is worth between £1.25 and £1.5 million. Our mortgage was £15,000 or thereabouts. Had we stayed in that house we would be living in something that cost us around £27,000 (including renovation costs - it was a wreck) A nice big profit for which we would have done little, after the renovation was complete, other than redecorate and maybe replace kitchen and bathroom. Not much over a period of 40 or so years!

As it happened we moved to the countryside and then to France. In both instances prices do not match London so our worth has gone done substantially.

I earned my money through blood, sweat and tears. I paid shed loads of tax on it and now when I die I’d like my children to have it. What’s wrong with that?

More people (who are able to) should gift to their children, then survive for seven years. It's just mad, if we don't need it - and they do - to hang onto money and make them wait until we die!