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

It is often assumed that it is only the richest in society that pay inheritance tax. This is simply not true. The richest can find ways of arranging their affairs so that inheritance tax is minimised. These arrangements are simply not open to middle income people: those who have earned all their money and been careful to invest it properly instead of simply spending it. It is those with a couple of million who pay the highest proportional- of their money to the government on death

Callistemon21

It obviously affected some more than others 🙂

I imagine entirely too low mortgage rates the last many years have led to investors snapping up rent-lets. Perhaps that was true prior to the few high mortgage rate years also.

However, some bought v rented in high mortgage interest times. Affected indeed for that period of time.

Luckily we're quite elderly - mortgage didn't change life negatively.

Back to IHT. If it must change, what is the best way forward?

Germanshepherdsmum

Historic bank rate figures
www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp
Obviously not the same as mortgage rates which will be higher but will follow this trend.

That looks more like 17 years of high and even higher Bank Rates.

It obviously affected some more than others 🙂

Historic bank rate figures
www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp
Obviously not the same as mortgage rates which will be higher but will follow this trend.

Dinahmo

Norah

Callistemon21

Curious, the number of years was not too long, correct? I could find that, I suppose, but I'm a bit confused as to what to google

What number of years?

Number of years of higher interest mortgages.

Sorry, poorly asked.

The MLR went from 7% to 15% in 1988, started to fall in 1991 and was back to 4 1/2 % in 1994.

Mortgages would have been at a slightly higher rate. For example ours was 15% or 17%. I can't remember exactly because it was such a long time ago. IT was s hock because we'd bought our house a the end of 1986. Luckily it was our second home and so we had some equity in it.

A six year time of high mortgage rates? Is that what people are referencing?

Yes, it was probably 17%
It was a struggle.

Norah

Callistemon21

Curious, the number of years was not too long, correct? I could find that, I suppose, but I'm a bit confused as to what to google

What number of years?

Number of years of higher interest mortgages.

Sorry, poorly asked.

The MLR went from 7% to 15% in 1988, started to fall in 1991 and was back to 4 1/2 % in 1994.

Mortgages would have been at a slightly higher rate. For example ours was 15% or 17%. I can't remember exactly because it was such a long time ago. IT was s hock because we'd bought our house a the end of 1986. Luckily it was our second home and so we had some equity in it.

The incoming administration of Margaret Thatcher raised interest rates to 17 per cent, as the government of the time saw this as a critical weapon in combating inflation, which was steadily rising at the time. It did have the effect of reducing inflation, although critics noted its negative impact on UK manufacturing exports. Interest rates began to rise again towards the end of the 1980s, partly under the pressure of house price rises. Interest rates had gone from 17% in 1979 down to 9% in 1982, and were back to 14.88% in October 1989.

Interest rates are not mortgage rates, they are always higher of course. House prices went up dramatically too.

The cost of home ownership continued to rise at lightning speed in the 1970s

The average house price in the London area was far higher, of course.

Callistemon21

^Curious, the number of years was not too long, correct? I could find that, I suppose, but I'm a bit confused as to what to google^

What number of years?

Number of years of higher interest mortgages.

Sorry, poorly asked.

Curious, the number of years was not too long, correct? I could find that, I suppose, but I'm a bit confused as to what to google

What number of years?

maddyone

^the only people who really suffered^

Your words Dinahmo.
From your description, you were clearly not in the same situation that many people were in those times. You don’t know what it’s like choosing between shoes for your child or food for your child. Or not having sufficient money to buy a winter coat for your child, because your mortgage was so expensive.

Curious, the number of years was not too long, correct? I could find that, I suppose, but I'm a bit confused as to what to google.

the only people who really suffered

Your words Dinahmo.
From your description, you were clearly not in the same situation that many people were in those times. You don’t know what it’s like choosing between shoes for your child or food for your child. Or not having sufficient money to buy a winter coat for your child, because your mortgage was so expensive.

Callistemon21

Your life experiences sound hugely different to those of many people I knew who were bringing up families in the 1970s and 1980s, Dinahmo.

As I have said, we don't have children but I suspect at times my life experiences were far worse but the choices made were of our own making.

maddyone

I’m afraid I think you’re looking at the past through your own experiences Dinahmo.
Many people struggled hugely to pay their mortgages and put food on the table for their children. Everything they bought was far more expensive than today in terms of percentage of salary. A washing machine for example was a major purchase. Salaries were far lower, luxuries unaffordable for many and even necessities unaffordable. Young families in the 70s and 80s. Your comment that the only people who really suffered shows a total lack of understanding of the financial situation for many people during those years.

We too suffered financially during the 70s and 80s. Like many people we bought the most expensive house that we could afford. But it was a wreck - ie it had closing orders and would have been condemned had it not changed ownership (to us) and so there was a stay of execution.

We were only able to get a mortgage on it because a former colleague was the accountant for a small London building society. As it was we had to pay both the mortgage repayments plus a bank loan for the full amount. So in effect we we were paying off £30k loan on an £18.5k house. It had a loo and one cold water tap. My DH split his time (7 days per week) between his own business and doing the renovations. He wired, plumbed and installed central heating in addition to rebuilding the brick pillars under the floor, removing plaster for the damp course and then re-plastering. For 2 years we went to friends for baths, otherwise we were boiling water in a kettle. We didn't have a washing machine we went to the launderette.

Shortly after we moved to Suffolk my job moved out from London in a different direction. I could have moved into the practicing office but I was not really large firm material and decided to look for work closer to home. Shortly after we moved my DH's main client moved from London to Gloucestershire and decided that it would be too difficult to send work between London, Gloucestershire and Suffolk so that income stream disappeared. When I went for interviews I was told that I was too old (40) and at one, a panel of about 6, the only woman on it asked what my husband felt about me driving from East Suffolk to Norwich, about an hour's journey. She should not have asked that question and my response unfortunately showed my anger. I eventually got a job which I knew I didn't want and cried all the way home. My DH was so relieved that I didn't tell that.

Luckily my DH's client changed his mind - he couldn't find a restorer as hood as my DH.

Anybody with a mortgage suffered financially during that period, as did we. The only difference between us and most people was that we didn't have children and had two incomes coming, although rather small.

I can assure you that I was fully aware of the problems other people had but, if I look at my friends, most of whom had children, we all survived.

My generation bought second hand furniture and went to charity shops on a regular basis. Those of my friends that did that were quite pleased with themselves. Other friends would not be seen dead doing that.

I stand by my statement about the only people who really suffered were those with negative equity who had to sell their home.

The following is taken from a report produced by the Joseph Rowntree Foundation:

"ONE IN FOUR people who bought their homes between 1988 and 1991 are living in properties worth less than the value of their mortgage, compared to one in five last year.

The proportion of those with negative equity has increased because house prices fell in the year to October. Prices fell dramatically in the last quarter of 1992 and then recovered slightly.

Virtually all the people suffering from negative equity bought their properties between 1988 and 1991. Of this group, one in 10 had negative equity in October 1991, one in five in October 1992, and one in four by October 1993.

Today's report also shows that younger buyers and those whose loans represented a high proportion of the original purchase price are hardest hit by negative equity: 48 per cent of recent buyers who bought when aged between 20 and 24 now hold negative equity, compared to only 8 per cent of those who were older than 50 when they bought.

Over two-thirds of those who bought during the late Eighties boom with a 95 per cent or higher mortgage are now affected compared with half in October 1992."

Callistemon21

Your life experiences sound hugely different to those of many people I knew who were bringing up families in the 1970s and 1980s, Dinahmo.

The 15% interest mortgages frame must've been a bit difficult for those with mortgages. I vaguely knew it was happening but we were well past home purchasing phase or life, thankfully.

By the time our first 2 were through uni and purchasing their homes, rates had normalized. Seems quite cyclical.

GrannyRose15

Norah

I believe the estate pays IHT, not those inheriting.

That is not true. The tax has to be paid by the beneficiaries before they can inherit the money left to them

Within 6 months of death, the estate executor must pay the IHT. Of course IHT must be paid before beneficiaries receive.

The executors are responsible for paying IHT GrannyRose, not the individual beneficiaries.
Payment of IHT can be deferred until there are funds available (for instance a house is sold if there are insufficient liquid assets) but interest is charged.

Yes, IHT has to be paid within 6 months of the death. My Mum died in September 2019, no house to sell (she was in a nursing home), but her assets were tied up in bonds, gilts and other investments. We nearly had to get a loan to pay, but the bond company released enough to pay the IHT before her estate was dispersed.

Somewhere in my memory I think there was a fixed time limit in which to pay the IHT. Maybe 6 months? I remember because my mum died in the July, I had my 1st baby in the August, and the person buying my mum's property was dragging their heels.

Norah

I believe the estate pays IHT, not those inheriting.

That is not true. The tax has to be paid by the beneficiaries before they can inherit the money left to them

Your life experiences sound hugely different to those of many people I knew who were bringing up families in the 1970s and 1980s, Dinahmo.

maddyone

I’m afraid I think you’re looking at the past through your own experiences Dinahmo.
Many people struggled hugely to pay their mortgages and put food on the table for their children. Everything they bought was far more expensive than today in terms of percentage of salary. A washing machine for example was a major purchase. Salaries were far lower, luxuries unaffordable for many and even necessities unaffordable. Young families in the 70s and 80s. Your comment that the only people who really suffered shows a total lack of understanding of the financial situation for many people during those years.

It was a real struggle, particularly as we had to relocate and take on a much larger mortgage at 15%.
We dreaded anything going wrong, particularly the washing machine.

I’m afraid I think you’re looking at the past through your own experiences Dinahmo.
Many people struggled hugely to pay their mortgages and put food on the table for their children. Everything they bought was far more expensive than today in terms of percentage of salary. A washing machine for example was a major purchase. Salaries were far lower, luxuries unaffordable for many and even necessities unaffordable. Young families in the 70s and 80s. Your comment that the only people who really suffered shows a total lack of understanding of the financial situation for many people during those years.

Callistemon21

Most people bought a property with a mortgage; mortgage rates were 15% at one time so, although a property may have cost £50,000 in eg 1980, the total cost would be far in excess of that.

So, instead of paying rent - you paid interest on your home. We also paid interest in excess of 15% because of the building society we happened to be with at that time. In the scheme of things, the period of high interest rates was not that long. The MLR went from 7% to 15% in 1988, started to fall in 1991 and was back to 4 1/2 % in 1994.

Apart from having less spending power during that period the only people who really suffered were those with negative equity who could not ride it out because they had to sell.