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

I know because my mother died 2 years later, sadly nowhere near the 7 years and everything was scrutinised. The saving grace was that a friendly estate agent had fiddled the value of the property she gifted me down as far as he could before her death in order to pay less tax, though I still paid a whopping amount on her estate.

I'm abroad so can't find the exact figure from my documentation, but it was around £540,000 (today's money) in tax. So there's no way I am giving any more away.

When people say that they have earned every penny that they will leave behind, I have a certain sympathy with that, as I, along with my husband, have earned everything we own, too. Neither of us has inherited a penny, and if we do in the future it won't be a lot, as we both have two siblings and their grandchildren are included in existing wills. I understand the desire to pass on what we have worked for - it's part of the reason we did so.

However, money that is accrued simply by living in a house is not earned, and is massively variable by location. I think that this should be taxed, rather than total amounts. So if someone bought a house for £10k and it is now worth £200k there should be a formula that works out what the £10k paid at the time is worth in today's money, and the difference between that and the selling price should be taxed. Savings from income have already been taxed at source and again on the interest, so I don't think they should be taxed again on death; but unearned profit on property should, IMO be liable to tax, in order to avoid exacerbating existing geographical inequalities.

Joseann

I'm abroad so can't find the exact figure from my documentation, but it was around £540,000 (today's money) in tax. So there's no way I am giving any more away.

If that was 40% of the estate after the IHT allowance I think your mother must have left far more than most of us will get anywhere near.

Most people need to take out a mortgage to buy a property, paying over time out of their taxed income significantly more than the amount borrowed. The days of MIRAS are long gone. They may also make improvements to the property which increase its value , paid for out of taxed income or through a further loan. They have maintained and repaired their property out of taxed income over the years. Simply saying that the property has increased in value and that increase is unearned and should be taxed is disingenuous.

Doodledog

When people say that they have earned every penny that they will leave behind, I have a certain sympathy with that, as I, along with my husband, have earned everything we own, too. Neither of us has inherited a penny, and if we do in the future it won't be a lot, as we both have two siblings and their grandchildren are included in existing wills. I understand the desire to pass on what we have worked for - it's part of the reason we did so.

However, money that is accrued simply by living in a house is not earned, and is massively variable by location. I think that this should be taxed, rather than total amounts. So if someone bought a house for £10k and it is now worth £200k there should be a formula that works out what the £10k paid at the time is worth in today's money, and the difference between that and the selling price should be taxed. Savings from income have already been taxed at source and again on the interest, so I don't think they should be taxed again on death; but unearned profit on property should, IMO be liable to tax, in order to avoid exacerbating existing geographical inequalities.

Land is also taxed differently for IHT - I say that because I'm not sure every little inequality in the IHT system can/could be addressed.

Let's assume there are people who received after the passing of their parents - the money (below 325,000/ parent) was free from IHT. Their parents presumably always paid taxes, same as we all do on earnings, interest - but it seems to me the people receiving at their parents deaths have as much a "free variable" as do people (say) living in an inflated value home the South.

There is no totally fair and equal in life regarding assets, imo.

So if someone bought a house for £10k and it is now worth £200k there should be a formula that works out what the £10k paid at the time is worth in today's money, and the difference between that and the selling price should be taxed.

Interesting, Dd

According to an online inflation calculator the price of the property we bough 29 years ago is now just about doubled. Mind you, I have no idea what it would sell for today. Possibly not much more...

So long as they haven’t made their money through criminal activity, there’s nothing wrong with some people having ‘far more than most of us will get anywhere near’ Maizie.

Grantanow

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.

Absolutely Grantanow

Surely this is the key and simple to operate - a matter of changing the threshold..

I'm for inheritance tax.

Life is a lottery.

Before we die we may use few services provided by taxation, but many will use a very great deal unless you have the resources to go private on everything, and the money has to come from somewhere.

I have a very severely disabled granddaughter who'll need lifelong care but the family has already put saving plans etc in place so my family won't suddenly need money from me. She's already had so much from the state, thanks for taxes, and there are very many worse off as we know.

If paying some inheritnace tax means a slightly better end of life care for someone at the bottom of the pile, so be it. As a society we stand or fall together.

At the time Maizie - 40 years ago - the IHT threshold was around £50k. The value of property in London was way higher even then.
I'm offering my story to show how it was/is for the growing % of people someone mentioned, though as a person barely out of uni I would rather have had my mum than any of the money she left. That's why I'm keen to keep living and spending.

It is of course those least likely to have an estate sufficient to attract IHT who are most in favour of its continued existence.

Or most in need of services, GSM. And why not? I like to think we still attempt to live in a welfare state.

You make an interesting point Doodledog and it certainly would be a compromise.
However, in essence I agree with GSM. We have improved our house by having an extension built and some other improvements made some twenty years ago and obviously that was paid for out of taxed income.
I’m not actually totally against inheritance tax. I just think the levels are set too low. Inheritance tax was not intended for ordinary people living in ordinary houses but for people who were genuinely well off. But with only 43% of workers paying net tax at and the level of spending by government, there have to be other ways to raise money. Services such as those provided to Wyllow’s granddaughter no one wants to see cut, but there are plenty of economies that could be made.

Germanshepherdsmum

So long as they haven’t made their money through criminal activity, there’s nothing wrong with some people having ‘far more than most of us will get anywhere near’ Maizie.

Is that completely true? Doesn't built in inequality matter at all. Perhaps you still believe believe that "God" still orderes our estate and as long as yours is the "castle" while someone else leans on the poor man's gate, everything is okay.

Germanshepherdsmum

It is of course those least likely to have an estate sufficient to attract IHT who are most in favour of its continued existence.

Where are the facts that back such an egregious statement. We are, after all only discussing 7% of the population. How many will drop out of the tax they currently think they may pay because of care costs, I wonder. I presume you believe they will immediately change their mind about it. I see "Conservative" and "nasty" have become interchangeable once more. It does clarify why they identified with a man who was only out for himself.

Your faith in your fellow man seems strangely shallow.

Bobbysgirl19

BeverleyJB

maddyone

Callistemon, just imagine how much a gift of £3000 would buy forty years ago. If people wish to gift to their children it is their right to do so. £3000 is not very much these days.

People can gift however much they wish to whoever they wish. There is no restriction!

Where a gift over £3,000 pa MAY have an impact is if the giver dies within 7 years of making it AND the value for IHT purposes of giver's estate - taking into account such gifts in the previous 7 years - exceeds the IHT nil rate band.

As stated at the start of this thread, only a very small % of estates fall into this category.

Yes but the point is that if you die in less than seven years the beneficiaries of your gifts may be liable to pay inheritance tax on your gifts!

Also, as there are roughly 67 million people in the UK the so called small percentage runs into millions of people and will
continue to grow if they are not raising the inheritance tax threshold. It’s a way of getting more money for their coffers. Disgraceful!

You are missing the crucial point though - as the title of this post says - MOST people (or rather their estates) will never have to pay IHT.

How many people will die with an estate valued at over £325,000 or double that for a couple? The small percentage that you state does not “run into millions”.

The fact is only 3.76% of deaths in 2019/20 resulted in an IHT charge.
www.gov.uk/government/statistics/inheritance-tax-statistics-commentary/inheritance-tax-statistics-commentary

As the poster who mentioned taxing property values, I resent the word 'disingenuous', GSM. I am nothing of the kind.

It is true that I hadn't considered things like extensions, but a formula such as I describe could easily include that, and it was an oversight, not disingenuousness.

Maisie, your situation would be true for many people living outside of the SE - not because you have contributed less, or for anything other than the fact that there is entrenched inequality.

And Daisy, I agree that suggesting that 93% of the population is envious rather than capable of having an opinion on fairness is reprehensible.

£325,000 doesn’t buy a two bedroom flat in my vicinity.

Grantanow ^ 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.^

Actually, as someone has already pointed out, it is not those, like me, whose estate will pay IHT, who are opposed to IHT. I, have never opposed it, ithas always struck me as a reasonable and sensible tax.

The people who most oppose it - see this thread, are those who might have to pay it unless the current exclusion amount is raised.

Personally, I would like to see a much more regressive IHT, where estates become liable for IHT at a much lower level, say around £100,000, but where the rate for the first £100,000 over that is set at 10%, for the next £100,000 it will go up to 20% and so on so that the top rate of 40% only comes in at £500,000, but many more pay IHT, but at lower levels.

As someone said earlier - gifts out of income. are different.

M0nica I am not being conned by he very well off lobby

I pay my taxes on all of my income, everything DH and I have bought has been with income which has been taxed. Most things purchased have VAT added to
the price.

I am of the opinion that what’s ours is ours and we should be allowed to leave it to our AC and GC without them having to pay IHT.

Nobody can persuade me that IHT is ok at the limit of £325,000 I would go as far as raising the level to at least £1,000,000 if not £1,500,000.

GrannyGravy13

£325,000 doesn’t buy a two bedroom flat in my vicinity.

Differences.

North, South, Rural, City, good or bad neighborhood - difficult to lay in a number that suits all people in all situations.

Our 5 bed 3 bath very old farmhome is worth far less than £200,000. But it cost less than £2,000 in the late 50s and has been extended/ added on/ modified back side with Mansard roof, etc, many times.

M0nica

Grantanow ^ 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.^

Actually, as someone has already pointed out, it is not those, like me, whose estate will pay IHT, who are opposed to IHT. I, have never opposed it, ithas always struck me as a reasonable and sensible tax.

The people who most oppose it - see this thread, are those who might have to pay it unless the current exclusion amount is raised.

Personally, I would like to see a much more regressive IHT, where estates become liable for IHT at a much lower level, say around £100,000, but where the rate for the first £100,000 over that is set at 10%, for the next £100,000 it will go up to 20% and so on so that the top rate of 40% only comes in at £500,000, but many more pay IHT, but at lower levels.

The people who most oppose it - see this thread, are those who might have to pay it unless the current exclusion amount is raised

That is an assumption you have made, not a fact.

Some of us can look at this and other matters of taxation objectively, comparing the UK to other countries.

Our economy would not collapse if IHT was removed or at least banded, as is income tax.

GrannyGravy13

£325,000 doesn’t buy a two bedroom flat in my vicinity.

The problem is not IHT, it's a minnow in the scene of things..

The problem is that house prices went out of control and in many areas bear no relation to salaries.
Hence, rents are also sky-high.

Everyone seems to have missed the post about the extra £175,000 allowance for a residence.

Which makes the allowance on a house at least £500,00.

As it seems to be the inflated value of their houses that most posters seem to be worried about perhaps they should bear that in mind. And if the property is jointly owned then the total allowance would be £1million.