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

Am I right in thinking that if the rules changed, the wealthy might just up sticks and go to live out their remaining days in another country? Wouldn't our own economy suffer from losing their spending power?

The grey pound is enormously important for the British economy. It’s evident every single time DH and I pop out somewhere for lunch or afternoon tea. Or a visit to the theatre, the cinema, a hotel short break, even an EasyJet flight to a nearby European destination, in fact any place anywhere during the week or not in school holidays, the grey pound is there in full evidence. Lord knows what would happen to the economy without it.

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maddyone

Stella14

I have the controversial view, held by a minority of Economists, that inheritance tax should be 100% with all of it ring fenced for public services. We would then have exceptionally good health, social care, eduction and public leisure services. Each person would then have to work for their living in a wonderfully supportive society.

I think that’s called Communism.

And you have only to look at Russia and it's oligarchs to see how unfair that system has actually turned out to be.

Millions murdered or starved to death.

Equality 🤔

You can give away money in the amounts MaizyD says but it has to come from capital not income. I don't know about anybody else but I don't have a lot of capital to give away because we live in our largest Capital asset so, unless we get a mortgage, I can't give that sort of money away.

If you need the money, or want to travel, or give some away, the only two options are to downsize, or equity release. I wouldn’t advise equity release but it would provide funds that are needed or wanted.

maddyone

Maizie I think the poster was referring to taking all property owned by a person after death and redistributing it via health and social services. So no one would keep any of their accumulated wealth after death, or their descendants wouldn’t. That is called Communism.

Interesting paper here\;

Abolition of Inheritance was issued to abolish inheritance by law and by will. However, this did not mean that the government could entirely obtain the property of the deceased.
For example, the decree provided that a small circle of relatives could still use an estate not exceeding 10,000 gold rubles. Therefore, the abolition of inheritance was incomplete and compromised from the very start. The government continued to compromise their goal after launch of the New Economic Policy by reintroducing the right of inheritance in the Russian Civil Code of 1922, although the government did not abandon the idea of the abolition of inheritance.

www.ier.hit-u.ac.jp/rrc/English/RRC_WP_N82.pdf

So the Soviets didn't achieve the complete abolition of private property.

Callistemon21

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maddyone

Stella14

I have the controversial view, held by a minority of Economists, that inheritance tax should be 100% with all of it ring fenced for public services. We would then have exceptionally good health, social care, eduction and public leisure services. Each person would then have to work for their living in a wonderfully supportive society.

I think that’s called Communism.

And you have only to look at Russia and it's oligarchs to see how unfair that system has actually turned out to be.

Millions murdered or starved to death.

Equality 🤔

I don''t know what comment your 'equality' comment has to do with.

The post glasnost Russia is not a communist state and has no pretentions to equality.

I recognise that the USSR did all those things in spades.

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Norah

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I think the real objection that I have to IHT is that tax has already been paid on income you received with which you bought the investments or property that you own when you die. However they will have increased in value since you bought them, so you could argue that you should pay CGT on the increase alone, not on the total value.

That seems fair enough, if adding the considerable costs associated with extensions, modern baths and kitchens, Mansard additions, extensive landscaping, conservatories, etc.

Those additions to the "basis" of the home one sells today v the cost basis of the one they purchased in 1959. Count on my vote.

I may be uneducated, but accounting is easy.

The trouble is that if the rules changed now not everybody would have the paperwork for any work they had done which added to the value - simply because your home has always been exempt from CGT. And, for example, would a replacement kitchen count? Probably not.

Replacement/improvement is a grey area. If you improve a property (ie put in a new bathroom where previously there none) then those costs are eligible for a deduction against CGT. Installing central heating, replacing single pane windows with double glazed are also improvements. Replacing an old kitchen sink with a new one, or repainting are not improvements.

Joseann

Am I right in thinking that if the rules changed, the wealthy might just up sticks and go to live out their remaining days in another country? Wouldn't our own economy suffer from losing their spending power?

Probably not. The cars they buy, the clothes and shoes that they wear are usually foreign makes, not even made in the UK.
Cleaners, nannies and housekeepers might be out of work.

Despite that there are a lot worse places to live that the UK. Lots of culture and some very good restaurants, also the schools that they might send their children to.

Of course the economy would suffer without the grey pound. A quick look around any restaurant, pub, cafe, hotel, nail bar, or aeroplane in the middle of the week, when it’s not school holidays, will very quickly show the value of the grey pound in Britain today. Obviously people who have chosen to live elsewhere will not appreciate this, nor have seen any evidence of this, but I have seen it repeatedly.
There maybe reasons for denying this, but it’s clearly true when you live here and are not a hermit.

That's true, Maddie, and I both see it and participate in it all the time, but there is a simultaneous situation where older people are unable to afford to heat food to eat. Did you see Britain's Forgotten Pensioners on Ch4 last week? It was shocking.

IHT is not responsible for the egregious lack of care for the elderly in the UK, but clearly if someone inherits in their 40s they will be able to save far more towards a pension than if they don't, and are unlikely to end up in the position of the people in the programme. I have a few different friends who inherited even younger than that who paid off their mortgages and were able to give their children cars, generous allowances when they were at university and so on. Much as I hope to be able to leave my worldly goods to my children (if the care system doesn't swallow them up) I can see the unfairness of the system as it stands. Also, being given enough money to put a deposit on a house and take on a smaller mortgage gives the lucky few a huge advantage, and perpetuates the housing inequality that is holding back so many young people.

It's a complex subject, but as someone who believes that we should all be able to spend earned income as we please, I think a fairer way would be to tax the money acquired by house price inflation. If it added up to a large sum overall, it could be used to build social housing with secure tenancies and reasonable rents.

I didn’t watch the programme Doodle but I am aware that many (is it a third or half?) of all pensioners claim Pension Credit, so that tells us a lot about the situation of older people here in the UK today.
I didn’t have an inheritance in my forties (I think you’ve said you’ve never had an inheritance too) and I received a small inheritance from my parents very recently as my mum died last year, dad died some seven years ago. Mum was in a lovely care home for her last year, and it was very expensive, but I would have rather never inherited a penny than have her anywhere less nice.
We both worked as teachers and we paid our mortgage and independent school fees from the children being eleven years old. We put all three through university, paying upkeep and spending money, along with rent, books, tube fares etc. We were lucky in that two of them attended university before fees were payable. It cost us enough as it was. That we did all this on not huge salaries is why I feel I should not have to pay again after I die. Anyway, from what I’ve learned on this site, I now realise we won’t qualify for paying any inheritance tax and I no longer need to worry myself about it. I won’t deny we are comfortable, we live in our own house, four bedroom detached in the south, but not a huge house nonetheless, and we have some savings, and we have our teacher professional pensions as well as state pensions, and so we can live a nice life. I just don’t want to give anymore to the government.

I don't blame you. Nobody wants to give money to the government (particularly this one, in my case), but we are talking theoretically, rather than personally.

We too live in a 4 bed 'nice' house, and have decent pensions and some savings, but that is really neither here nor there. What is fair to society is the important thing, surely? We can all moan if changes are made and they impact on us, but until then we can think about what would make life better all round.

Dinahmo

Joseann

Am I right in thinking that if the rules changed, the wealthy might just up sticks and go to live out their remaining days in another country? Wouldn't our own economy suffer from losing their spending power?

Probably not. The cars they buy, the clothes and shoes that they wear are usually foreign makes, not even made in the UK.
Cleaners, nannies and housekeepers might be out of work.

Despite that there are a lot worse places to live that the UK. Lots of culture and some very good restaurants, also the schools that they might send their children to.

I doubt if we would miss the 'wealthy' who upped sticks and left because they don't spend enough into our domestic economy, as Dinahmo points out.

The so called 'trickle down' effect theory which they depend on to justify accumulating more and more wealth has been proved over and over again by economists to be a fallacy. So, if the wealthy won't spend into the domestic economy, what's the point of having them?

They also, before anyone chips in with this justification, are in the main, very unlikely to invest in new enterprises, particularly when they perceive them to be risky.

On the other hand, the less wealthy, and the poor, are highly likely (or have to) to spend into the domestic economy and are far more useful for sustaining economic activity and growth.

One of the prime arguments for IHT is that it prevents the concentration of the nation's wealth into the hands of a small group of people who are unlikely to use it to the benefit of the domestic economy.

To be of any use money has to flow through and round the economy. It has no value if it isn't used.

‘The nation’s wealth’ Maizie? I tend not to think of what I have as belonging to the nation.

My belongings don’t belong to the state either. They’re mine.

maddyone

My belongings don’t belong to the state either. They’re mine.

Not being Communist, I agree.

It occurred to me that if a tax was ever to be introduced on the increase in value of a house on a person’s death, then people would make sure they moved because the house you own is only more valuable upon its sale, but if you buy another property, the amount realised from the sale would be needed to buy the next property. Therefore there would be a much smaller profit available to be taxed upon the death of the person.
We’ve lived here in this house for 35 years, and clearly the clearly the value of the property has risen a lot. However if we moved we would have to pay today’s price on a new property, and therefore, as we’re unlikely to live another 35 years, and property prices are rising more slowly, upon our deaths there would be somewhat less profit to tax. I think that’s what people would do if such a tax was to be introduced.

Interesting answer MaizieD which sort of makes sense to me and sort of doesn't. I've just returned from a 5 hour boat trip where the average age must have been early to mid 60s. It was €27 euros each, plus around €30 euros each for lunch. The trip was packed, like someone said earlier, money was flowing which must surely be boosting the economy. So if IHT became 100% and I quickly left the UK and took my house sale money with me, wouldn't that mean the UK government might be a bit miffed to see me pouring my cash proceeds into a foreign economy?
(I have to say that I can also clearly understand why protestors don't want the retirement age raised from 62 when they see the lifestyle that active wealthyish pensioners are enjoying!)

I can see why people don’t want the retirement age raised in France too Joseann. I feel sorry for people in the UK who now have to wait until they’re 66 and soon it will be 67, and the government talk of raising the retirement age to 70 or even 72. People working themselves into their graves is unacceptable in our rich country. Of course many will be wealthy enough to retire whenever they want to, including MPs, who often end up in the HofLs, claiming £300 a day just to turn up. Meanwhile back in reality, people will work themselves into an early death. Inheritance tax will be the least of their problems.

maddyone

It occurred to me that if a tax was ever to be introduced on the increase in value of a house on a person’s death, then people would make sure they moved because the house you own is only more valuable upon its sale, but if you buy another property, the amount realised from the sale would be needed to buy the next property. Therefore there would be a much smaller profit available to be taxed upon the death of the person.
We’ve lived here in this house for 35 years, and clearly the clearly the value of the property has risen a lot. However if we moved we would have to pay today’s price on a new property, and therefore, as we’re unlikely to live another 35 years, and property prices are rising more slowly, upon our deaths there would be somewhat less profit to tax. I think that’s what people would do if such a tax was to be introduced.

Why would you move to a house that's approximately the same size (implied by your comment about moving). Most people when they get to a certain age want to downsize and, unless you're moving to a much classier area, there is going to be a profit.

The reason any gain on PPRs isn't taxable is because HMRC would have to give tax relief for the loss. That's the reason why there's no income tax on gambling because more people make losses that gains. Of course, there's betting taxes but they are different.

maddyone

I can see why people don’t want the retirement age raised in France too Joseann. I feel sorry for people in the UK who now have to wait until they’re 66 and soon it will be 67, and the government talk of raising the retirement age to 70 or even 72. People working themselves into their graves is unacceptable in our rich country. Of course many will be wealthy enough to retire whenever they want to, including MPs, who often end up in the HofLs, claiming £300 a day just to turn up. Meanwhile back in reality, people will work themselves into an early death. Inheritance tax will be the least of their problems.

Pension age debate is such a mystery to me.

Healthy life expectancy has changed since I was a child.

Before Pensions Act 1995, state pension age had been 60 for women, 65 for men. Now, under Under the Pensions Act 2014, government accelerated rise in state pension age to 67 (April 2028) for both men and women.

In future the pension age may be 70 to 72.

We live longer than people in years gone by.

I don’t want to move Dinahmo. I was musing about how people might try to avoid inheritance tax if it was brought in just for the profit on a house. I was only thinking about it because that’s not even the situation, but several people have suggested it could be a possibility. It would require a change in the law to make it happen and I very much doubt it ever will.
Don’t you ever muse about things?

Nora, people may live longer but that doesn't mean they are able to work. By the time my Mum reached the pension age of 60, she was already suffering really badly from arthritis limiting her ability to use her hands and by 70, she was barely able to stand. My aunt was similarly incapacitated. I know lots of people like that and claiming benefits automatically make it so you have to apply for jobs etc unless you are long term sick and even that is aimed at getting you back to work.

maddyone

I don’t want to move Dinahmo. I was musing about how people might try to avoid inheritance tax if it was brought in just for the profit on a house. I was only thinking about it because that’s not even the situation, but several people have suggested it could be a possibility. It would require a change in the law to make it happen and I very much doubt it ever will.
Don’t you ever muse about things?

Lots of things but not tax!