IHT- how to avoid if you have enough wealth

ronib

I think that the new government is going to force some pensioners to leave family homes they have lived in all their lives. I believe that the single person discount for council tax will be removed, coupled with higher energy and food bills. Not forgetting the WFA for the just about managing. Unless equity release is taken, pensioners will not have funds to remain in properties designed for families. This in turn will increase the availability of family homes and encourage downsizing. More flats are going up here than any other type of housing.
I neither agree nor disagree with this policy.

They're going to have to encourage builders to build more homes suitable for older people then, because most new builds are larger family homes, albeit with small gardens.

I don't mean one bedroom apartments with kitchen/lounge/dining area and a tiny shower room because some of us would like a bit more room than that if possible, nor retirement complexes, but some choice and availability might encourage us to downsize.

What a great post M0nica

growstuff

Allira

However, as Maizie(?) pointed out above, there are some who don't care about inequality and the effects on society as a whole. It's far easier to be smug and blame the "have nots" for their own situation.

May I point out that often Norway is held up as an example of how a state should be run and that perhaps the UK should follow Norway's example.
Norway abolished inheritance tax 10 years ago.

If the very wealthy were taxed at source in the UK and those who attempted to evade tax were stopped and made to pay their dues, some loopholes were closed, then there might be less equality in this country.

But Norway does tax wealth.

Which is exactly what I thought I said should happen here.

growstuff, as I said earlier on in the thread, I have no issue with IHT. However, I do challenge the statement about my status as a " wealthy parent". I am long divorced, and raised my children with very little support from my ex husband , on a teacher's salary.
IHT for single people is £500K, which is the value of my three bedroom semi in the SE, so my heirs will pay tax on my savings.
I repeat, I am not taking issue with that, but I am not wealthy. I have been thrifty throughout my life. I am not a millionaire.
The children will probably inherit enough money from their father for a book of second class stamps.

That's a fair point, Chocolatelovinggran

I think a fairer way would be to limit the amount an individual can inherit, rather than taxing the estate, as families come in all shapes and sizes. A single parent with five children is in a very different position from a couple with an only child.

I do remember a colleague telling me that £100,00 was nothing these days! Thst was very many years ago and I was astonished as we had little in the way of savings.

Relatively speaking, £500,00 or even £1 million is not a lot these days when compared with the vast wealth accumulated by some in this country.
Some of these people may be evading tax or using schemes to hide their wealth to avoid tax and setting up schemes so that their own families never pay any inheritance tax.
It's people like Chocolatelovinggran and her heirs who are the ones dutifully paying, not the super-rich.

True Allira.

It is true, but you can always choose a point of comparison to make anything sound good/bad or high/low.

Compared to the average wage, or the average amount of savings, a million pounds is a lot.

But with the average house price in the Uk being £282,000, £470,000 in the south east and the majority of the deceased not having been in care. There are quite a large nunber of average families where the total inheritance for a couple could be well over £500,000.

Of course, but as a percentage of the people in the country if the number of people who pay IHT still stands at 4% then those people are, by the standards of everyone else, very well off. They are not average by ay measure. I agree about single people being disadvantaged, as Chocolatelovinggran pointed out. I hadn't really thought about that before, and it is a good point. Perhaps that needs looking at somehow.

Doodledog

Of course, but as a percentage of the people in the country if the number of people who pay IHT still stands at 4% then those people are, by the standards of everyone else, very well off. They are not average by ay measure. I agree about single people being disadvantaged, as Chocolatelovinggran pointed out. I hadn't really thought about that before, and it is a good point. Perhaps that needs looking at somehow.

Doodledog ^I agree about single people being disadvantaged, as Chocolatelovinggran pointed out. I hadn't really thought about that before, and it is a good point. Perhaps that needs looking at somehow.

IHT is replete with inequity.

The average price of a home is £280,000 and many people own homes worth far less. Not everyone lives in an expensive home.

If your home is not worth £175,000 (or £350,000 if two spouses' allowances are combined), you can't use the main residence allowance to offset tax against other assets. No matter the total of the estate.

Doodledog Do you live in the south east? Most people living in these expensive houses are people like you and me, who first got on the housing ladder in the 1960s/70s. They were always average wage earners and have average, even small pensions. It is the value of their property that sends them into the IHT range.

My circumstances are really neither here nor there, but I will say that we bought our first house in the early 80s when I was 21.

I understand what you are saying about average earners, but that's neither here nor there either. This isn't about whether people have worked hard or been paid well, and it's not about penalising the rich (however that is defined and however their riches were obtained) - it's about cutting down on people passing on significant sums of money which perpetuate inequality.

Norah, I understand that not everyone lives in an expensive home. This is one of the reasons why caps on spending on social care is so unfair. Limiting costs to (say) £100k is nothing if your house is worth a million. There is still a lot to leave to your children. If it's only worth £120k, however, clearly there is not much left to share between the heirs, yet this is never brought up when care costs are discussed - caps are seen as equalisers when they are anything but.

I'm not sure I understand the second bit of your post though. Are you saying that only houses worth over £175k (or £350k if owned by a couple) count towards the allowance of £1million? What is the situation for someone with a house worth £120k who also has significant savings?

But we all know that house prices rise significantly faster than wages do. In London they have soared because as long somebody can afford to buy in an area of high demand, it won't stop.
As a new graduate in 1980 London, I was earning £5k per annum. The house I was about to buy, before I unexpectedly inherited, was on the market for £40k. I've checked it out and the same house is £880k in today's money. Would that I would currently be earning £110k today. If only!
That's why a £1 million house might be pretty average in an expensive area. That 4% of the population who pay IHT may well double in number in the next few years when many oldies in our generation die.

Doodledog, that is such a socialist remark! You cannot make everybody equal no matter how much you would like to! It has been shown not to work in Communist Russia. There will always be inequality in the world.

Doodledog

My circumstances are really neither here nor there, but I will say that we bought our first house in the early 80s when I was 21.

I understand what you are saying about average earners, but that's neither here nor there either. This isn't about whether people have worked hard or been paid well, and it's not about penalising the rich (however that is defined and however their riches were obtained) - it's about cutting down on people passing on significant sums of money which perpetuate inequality.

Norah, I understand that not everyone lives in an expensive home. This is one of the reasons why caps on spending on social care is so unfair. Limiting costs to (say) £100k is nothing if your house is worth a million. There is still a lot to leave to your children. If it's only worth £120k, however, clearly there is not much left to share between the heirs, yet this is never brought up when care costs are discussed - caps are seen as equalisers when they are anything but.

I'm not sure I understand the second bit of your post though. Are you saying that only houses worth over £175k (or £350k if owned by a couple) count towards the allowance of £1million? What is the situation for someone with a house worth £120k who also has significant savings?

You didn't understand because I didn't explain well.

I was attempting to point out that a house south of £175k (or £350k if owned by a couple) will not qualify for the entire main residence allowance - thus will pay IHT on assets not "covered" by that allowance.

For example: an estate with a home worth £200k (for round numbers) is "losing" £150k out of £1,000,000.

Significant savings? You "lose" a significant portion of £1,000,000. Actually one loses 15% in my example (if my math is correct).

BevSec

Doodledog, that is such a socialist remark! You cannot make everybody equal no matter how much you would like to! It has been shown not to work in Communist Russia. There will always be inequality in the world.

I am not offended by being called socialist, if that's what you intended, sorry .

However, I did not say (and do not believe) that it is a good thing to 'make everybody equal'. Perhaps if you read my posts (and mugged up a bit on political theory or Russian history) you would understand that.

IHT allows heirs to inherit 60% of everything over a million pounds, and is paid by a mere 4% of the population. Wanting that to be extended is hardly on a par with Stalin, is it?

And funnily enough I had noticed that there is always inequality in the world. There always has been and always will be - again, I don't need the blindingly obvious pointed out, thanks. I never said otherwise, and don't believe that it is even possible to 'make everybody equal', which is a very simplistic notion anyway.

That makes sense, Norah, thanks.

Charging IHT will not give money to the poor, nor will it make those who are rich enough to avoid it, noticeably poorer. So how does charging IHT address inequality?

It seems I need to remind everyone that the IHT threshold is £325k per person, that was set in 2009 and currently set until 2028.
There is an additional amount currently £175k for couples, subject to certain conditions, it’s not automatic for everyone.
It was a Tory give away to please voters, it’s not guaranteed as far as I can see
The relative IHT rate threshold has been reducing for many years due to price inflation of assets.

Doodledog, I did not mean to offend you, simply to point out that your remark about inequality is rather naive. We all want to pass on as much as we can to our children rather than to a government that will p* it up the wall, that is human instinct.

I am proud to be a Socialist. I believe in the redistribution of wealth.

The grabbing, the greed, the racism. It's a disgrace.

Eggplant, who are you redistributing it to? Public sector huge pay increases, MP expenses, benefits claimants, illegal immigrants? Is that who you want to have your inheritance rather than your children?

BevSec

Eggplant, who are you redistributing it to? Public sector huge pay increases, MP expenses, benefits claimants, illegal immigrants? Is that who you want to have your inheritance rather than your children?

I’d be ok with that. Of course it’s not a quid pro quo, any more than asylum seekers’ hotel bills are paid using money from the withdrawn WFP. But if the government has more to spend it can make healthcare, housing, education etc better quality which will reduce inequality.

BevSec

Eggplant, who are you redistributing it to? Public sector huge pay increases, MP expenses, benefits claimants, illegal immigrants? Is that who you want to have your inheritance rather than your children?

I am happy for what I have to be redistributed. Hopefully my children will make their own way .
I'm not entirely sure what an illegal immigrant is to be honest.