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

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.

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...

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.

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.

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.

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.

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.

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.

As a widow, I inherited my DH’s IHT allowance and also the main dwelling allowance and I completely agree with GSM and others. However, I think it’s particularly unfair on single and divorced people, where their threshold for IHT is, in effect halved and their estate is, therefore, more likely to incur IHT.

Norah

MaizieD

GrannyGravy13

Do you really think that the majority of folk actually decline all gifts to friends and family members?

Gifts is a point that puzzles me, GG13.

Surely HMRC doesn't trawl back through years of your bank accounts post mortem to see what gifts you've made during your lifetime? Or even just the 7 preceding years.

We keep a record of substantial gifts, no trawling needed.

A small book noting dates, amounts is sufficient, or so we've been told.

It's a good idea to write a letter to the beneficiary of any gifts that you make that are over the annual exemptions. Give them a copy and keep one yourself. You just have to say " Dear ....... I'm giving you £20,000" and date it.

Norah

MaizieD

GrannyGravy13

Do you really think that the majority of folk actually decline all gifts to friends and family members?

Gifts is a point that puzzles me, GG13.

Surely HMRC doesn't trawl back through years of your bank accounts post mortem to see what gifts you've made during your lifetime? Or even just the 7 preceding years.

We keep a record of substantial gifts, no trawling needed.

A small book noting dates, amounts is sufficient, or so we've been told.

That's what our solicitor said, too. Make a note of substantial gifts.

And the tax man can ask the banks directly about possible bank accounts not declared etc.

Follow the money! Unless you keep every penny under the mattress.

The tax-free threshold has stood at £325,000 for many years, but rising property prices meant more and more people have been pulled into inheritance tax in recent years

I understand that if the property was held jointly this means that on the death of both owners £1million of the value is exempt from IHT. I'm sure that is the figure our solicitor told us.

Slightly at a tangent, but I have a friend whose house move is being held up because the property they are buying from an elderly widow was held only in the name of her late husband, so they are having to wait for it to be registered in her name before she can legally sell it.

Make sure your property is in joint names...

I know they do, especially if you are at any time self employed.
I had a bit of a todo over shares my mother had bought me as a child too.

Yes Maizie, they do. they request bank statements etc if they suspect tax maybe payable. This happened to a friend of mine.

MaizieD

GrannyGravy13

Do you really think that the majority of folk actually decline all gifts to friends and family members?

Gifts is a point that puzzles me, GG13.

Surely HMRC doesn't trawl back through years of your bank accounts post mortem to see what gifts you've made during your lifetime? Or even just the 7 preceding years.

We keep a record of substantial gifts, no trawling needed.

A small book noting dates, amounts is sufficient, or so we've been told.

I think that you would find that they do if they suspect tax evasion etc.

GrannyGravy13

Do you really think that the majority of folk actually decline all gifts to friends and family members?

Gifts is a point that puzzles me, GG13.

Surely HMRC doesn't trawl back through years of your bank accounts post mortem to see what gifts you've made during your lifetime? Or even just the 7 preceding years.

Incidentally Monica, had my mother’s estate been valued at the sum your father’s estate was valued at, assuming your father was married before, the proportion of his estate subject to inheritance tax would be £50,000 which would be taxed at 40%. I’m not surprised your sister and yourself had no problem paying that tax because it left a fair amount for yourselves. My mother’s estate was small, considerably less than the figure you mention, and so I have not benefited from a huge injection of funds from my parents. Apart from that small amount, which I shared with my children now, rather than when I die, which will hopefully put us beyond the seven year limit, every other penny has been earned, tax paid, by ourselves.

I think franbern you mean £3000 per year could be gifted, not £30,000.

The IHT rate is £325,000 but there’s an extra £175,000 now that can be added.

The tax-free threshold has stood at £325,000 for many years, but rising property prices meant more and more people have been pulled into inheritance tax in recent years

To reduce this burden, the property allowance was introduced to help people leave property to family without being hit with large tax bills.

Crucially, you only qualify for this new allowance if your estate includes a property that you've used as a home at some point in your life.

Dinahmo apologies, you said your ex house is now worth one and possibly a half million. Of course, I’ve never owned a house that is now worth one and half million. The house we live in now is the most expensive we have owned, and it would not attract inheritance tax at the moment. We have a little in savings which might push us to or near the limit, but by the time we die (assuming it won’t be tomorrow) we will have made absolutely sure that those savings fall under the limit. We are comfortable. We have worked for what we’ve got and paid all our taxes with no attempt to hide any money (we really didn’t have enough to hide) and whilst you and others maybe happy to give yet more to the government (although you’ve said you’re leaving anything left to charity so you don’t pay inheritance tax) we are resolutely not happy to leave the government a single penny, and we won’t! It doesn’t matter whether others are poorer than us because we’ve worked all our lives in a not well paid or well appreciated profession and paid everything we were due to pay, like millions of others, and we have no wish to leave our money to anyone else except our children.

Monica nonetheless my parents estate came to nothing like £650,000. It was in fact very small. We are not in the same situation as you clearly.

M0nica

maddyone The figures and life circmstances you mention in many equate with my parents estate after my father died. His estate was valued at £650,000.

Neither I, nor my sister had any objection to paying IHT on his estate. It was an absolute fortune compared with how much probably half the population of this country leave when they die, in other words, little or nothing.

You will have no use for the money once you are gone, and on an estate like yours, even after IHT, there will be plenty of money left to significantly improve the circumstances of whoever you leave your estate to.

But why is it not banded?

And why has the £3,000 not increased in proportion to average income?

Yes

maddyone The figures and life circmstances you mention in many equate with my parents estate after my father died. His estate was valued at £650,000.

Neither I, nor my sister had any objection to paying IHT on his estate. It was an absolute fortune compared with how much probably half the population of this country leave when they die, in other words, little or nothing.

You will have no use for the money once you are gone, and on an estate like yours, even after IHT, there will be plenty of money left to significantly improve the circumstances of whoever you leave your estate to.

bikergran

The £3,000 gift allowance is laughable. My dad will never ever pay IT no where near. But what he does want to do is treat the family to the odd holiday, or pay for gson driving lessons and maybe put towards a car. He bought myself a small second hand car as mine had conked out (it was 17 yrs old) the one we bought is 14 yrs old. So we haven't gone for some luxury car.

Yet the government dictates to my dad who has grafted since he was about 12 yrs old (yes 12 ) why should he not spend his money as he wishes. ( In reasonable amounts if he can afford to) whilst yes at the same time making sure he has enough money if he needs care, which he may well do as he is 87 and suffered with Parkinson for the last 15 yrs) Why must he only be allowed to gift £3,000 explaining this to him is very difficult he is of sound mind but cannot grasp that the gov tell him what to do with his hard earned money. No wonder the older generation kept it "under the mattress" so to speak!

There is such a thing as gifts out of income. If you father is treating his family to a holiday and paying for it out of his pensions/other income, rather than capital then that is allowed.

As I said above - look on the HMRC website for all the exemptions.