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

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.

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

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?

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.

It obviously affected some more than others 🙂

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.

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?

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

•Norah• the best way to change IHT is to abolish it altogether.

GrannyRose15

•Norah• the best way to change IHT is to abolish it altogether.

Indeed!

Some of you are still not accepting the fact that most of the increase in the value of the majority of peoples' main investment, ie their home, is not derived from their income or their hard work.

I keep saying that, but I don’t think people want to believe it

Dinahmo

Some of you are still not accepting the fact that most of the increase in the value of the majority of peoples' main investment, ie their home, is not derived from their income or their hard work.

Nor is investment in stocks and shares.
Investment in stocks and shares may have been a better alternative to paying a mortgage over the same period of time.

Taking out a £50,000 mortgage over 25 years at an average of 10% interest rate (for 17 years it was in excess of 10%) means the total repayment would have been £136,305.

Norah

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?

Now interest rates are creeping up again, buy-to-let may not be such an attractive prospect; houses may be put back on the market and prices may drop.

Back to IHT. If it must change, what is the best way forward?
If not abolished altogether, it should be banded ie the same allowance which should rise with inflation, 20% for the next band, then 30%.

Other countries seem to manage financially without IHT.

Maybe IHT should only apply where someone has more than one property? The primary residence being exempt.

Dinahmo

Some of you are still not accepting the fact that most of the increase in the value of the majority of peoples' main investment, ie their home, is not derived from their income or their hard work.

No, you're right,* Dinahmo, I don't accept that statement!
you have your opinion and I have mine. I don't expect you to accept my opinion, nor should I be required to accept yours, that's what makes for a good discussion.
I agree that in areas where property prices are very high, it may well be that the property is the main asset but there must be lots of people who have worked and saved all their lives through hard graft., and their main asset is their savings,
There is a big regional difference in the price of property.
Another thing to remember is yes it was hard work for lots of people struggling to pay a mortgage, it involved a lot of sacrifice to get on the property ladder.

And a lot of hard work to pay the mortgage Bobbysgirl.

I think we do understand more than we're given credit for.

The total cost of a home purchased in the 1970s was probably about three times the initial price, with interest on loans and other initial charges.

Had all that money been invested in the stock market, it would probably be in excess of the value of that property.

We bought our first house in 1979 and married in 1980 by which time the repayments had doubled. We moved to a bigger place in 1989 as we wanted to start a family and interest rates rocketed again. Having had our fingers burnt we fixed at 16 or 17% for five years, so we’re stuck when they started to fall. That was very hard, as we had two babies by then. By the time the house was paid off and we could afford to save, interest rates were low, and are only just climbing now.

That’s just the way the cookie crumbles, but it’s galling to hear how people who bought their first house even slightly earlier for half the price we did (a friend had an identical one which was exactly half what we paid three years later), claim to have ‘worked hard’ for everything. My friend sold not long after we bought ours (at a 50% profit), moved to just outside of London (with a mortgage lower than ours) and made ££££ just for living there.

Again, that’s life, and I don’t begrudge them at all, but they worked no harder than we did - in fact my friend didn’t work at all for about 30 years after having her first baby, and her husband didn’t have double the salary of either of us- it was just that their outgoings were lower.

People who bought 10 or 20 years earlier made even more of a profit and benefited from much lower rates when their mortgages were new and higher, then again from the high rates on their savings when we were paying off ours. As before, that’s life, but why pretend it all came down to working harder? And for today’s young people it is even worse. No wonder they resent previous generations if the implication is that the high prices the young have to pay for housing is because they are not working as hard as their parents.

There is tax on savings from taxed earnings, so why not on the unearned money from living in a house? I don’t think that the fact that if we buy with a mortgage we pay more than the headline price is relevant really. It’s the gap between the price paid and the selling price for the inheritors that represents the unearned portion, although I can see that it’s not as simple as that if people have bought a ‘do it upper’ or if the increase is based on extensions etc. Much as I understand the desire to leave as much as possible to the next generation, the huge difference between prices across the country is just perpetuated if those whose parents have already made a lot from houses get given free money to keep prices high. The lottery of social care payments works against those outside of areas of high house price inflation too, as there will be less left over after those costs - nothing to do with working hard.

Good post Doodledog and yes, you're right that's the way the cookie crumbles - on both sides. There is a big difference between the value of a house in London or Cambrige and one in say Sunderland.

I know the animosity some people, (not on this particular thread), feel towards those with large inheritances. I experienced it myself from 21 years on ..... friends commenting about our sending our children to private schools, comments about our holidays, our cars etc. If you didn't embarrassingly explain to new acquaintances, you ran the risk of people questioning behind your back. I knew and understood that some people were struggling really hard with mortgages etc. but I think I would have swapped for that anytime.
Even my unkind MiL was heard to say, Z&Z don't need our help, they've got it all. ALL except practical help and moral support from loved ones course which we desperately needed. They'd let us pay the bills eveytime we went away, even though they could afford it, when it should have been my mum enjoying the grandchildren. Sorry, I've rambled.

As I said before, I recognise that it is hard for some not to feel a bit bitter jealous about others' inherited wealth. I appreciate the chance, like here, to sometimes explain that inheriting a large sum, house or money, especially when very young, isn't everything. It's how you are as a person that counts.

I'm just wondering, if as a mega rich person, all your wordly wealth is held in offshore accounts, does inheritance tax need to be paid then?

Joseann

I'm just wondering, if as a mega rich person, all your wordly wealth is held in offshore accounts, does inheritance tax need to be paid then?

If you were “domiciled” in the UK yes, it’s the “non doms” that get the advantage.

Mega rich people can find ways around paying all taxes! My SIL owned a flat and a house in London and the very beautiful country home that she lives in currently. Her two children have been given the proceeds from the sale of the London properties and she has transferred the ownership of her country house to her grandchildren, to whom she is paying a very handsome monthly rent. It will all have been done legally with any tax etc paid. BIL is dead and I expect SIL to live for many more years but when she goes I doubt there will be any inheritance tax to pay despite her wealth as it will all have been passed on down the line. And so the money increases and the rich get richer and the poor get poorer!

Doodledog, People who bought 10 or 20 years earlier made even more of a profit and benefited from much lower rates when their mortgages were new and higher, then again from the high rates on their savings when we were paying off ours.

I'm not sure you're correct.

We bought 20 years before you, my grandparents home (and their grandparents before them) for less than £2k at 5% fixed. Obviously, an old home (and it was quite old when we purchased) required many renovations, additions etc, and his wages were £500 a year - total.

Not all differences can or need be leveled out - cookie crumbles.

Not all differences can or need be leveled out - cookie crumbles.
Which is what I said. That's not my objection - my grumble is with those who insist that their good luck was really 'hard work'. It really wasn't, any more than any inflationary rise in the value of my own house has been earned by hard work - I'm talking generally here.