IHT- how to avoid if you have enough wealth

Norah

NotSpaghetti

Do people think that those people with nothing, didn't work hard - the same as anyone else.

Even those with nothing to show for it (maybe especially those) can have worked extremely hard.

There is a lot of smugness around "hard work" it seems.

Just saying.

I agree.

I also can't imagine why it matters one has "not earned" during home ownership. Homes cost much more than purchase price.

Not all homes have skyrocketed.

The last home sold near ours priced considerably South of £200,000 -- we'd have earned more saving at interest or investing in something else.

Re the last para - in that case and yours is similar in price to the one sold then you will likely be outside the scope. Unless you've a few Hockneys on your walls.

NotSpaghetti

Do people think that those people with nothing, didn't work hard - the same as anyone else.

Even those with nothing to show for it (maybe especially those) can have worked extremely hard.

There is a lot of smugness around "hard work" it seems.

Just saying.

I agree.

I also can't imagine why it matters one has "not earned" during home ownership. Homes cost much more than purchase price.

Not all homes have skyrocketed.

The last home sold near ours priced considerably South of £200,000 -- we'd have earned more saving at interest or investing in something else.

NotSpaghetti

Do people think that those people with nothing, didn't work hard - the same as anyone else.

Even those with nothing to show for it (maybe especially those) can have worked extremely hard.

There is a lot of smugness around "hard work" it seems.

Just saying.

I feel, like M0nica, that those that have to pay it are actually the lucky ones.
Same for higher rate income tax and so on...

Well said NotSpaghetti. More or less what I was going to write.

Doodledog, I agree that the lower threshold for paying tax should rise, as should the amount paid at the top rate, but that still assumes that it is those earning an income who should bear the main burden of tax, when workers also contribute their time and the goods and services their work provides, and pay for the ability to do so - in commuting costs, childcare charges, work clothes etc. I would prefer to see a fairer way of collecting tax from everyone able bodied and not caring for the sick or disabled, so a choice not to earn an income does not equate to a choice not to contribute financially to the benefits of living in a civil society.

I agree, there must be a way -- Oh yes, tax as a family/couple on total income - not per person. As a family OR as a person, their choice.

I hope my grandchildren do blow every penny we’re saving for them. It’s purely fun money, in my view.

I believe in n paying tax. I have no respect for those who evade it, particularly when it is on unearned income (and yes, house and land value based wealth is mainly unearned (and the ‘mainly’ is why there’s a threshold, of course))

That said, I think there’s a lot of scope for far more effective and redistributive taxes (indeed for a more redistributive tax system across the board) including a land value tax, but there is no sign so far that this government has the appetite for anything genuinely transformative.

Working out the cost of the loan would have to take into account any tax relief that was claimed when paying a mortgage, but I'm sure a formula could be arrived at that would do that, as well as factoring in inflation, average wages and other relevant figures. The fact would still remain, however that those who bought at a particular time in particular areas have made capital gains that were not a result of work.

I agree that the lower threshold for paying tax should rise, as should the amount paid at the top rate, but that still assumes that it is those earning an income who should bear the main burden of tax, when workers also contribute their time and the goods and services their work provides, and pay for the ability to do so - in commuting costs, childcare charges, work clothes etc. I would prefer to see a fairer way of collecting tax from everyone able bodied and not caring for the sick or disabled, so a choice not to earn an income does not equate to a choice not to contribute financially to the benefits of living in a civil society.

I don't think that a radical change like that could reasonably be imposed retrospectively, however, as people make choices based on the prevailing circumstances, but IHT is rather different, as by definition it takes nothing from the people paying it.

Allira

paddyann54

People seem to forget that if they paid a mortgage over 25 years their house cost a lot more than it said on the deed!Sometimes several times the cost

Yes, very true. Good point.

Has anyone worked out the actual cost of their property?

We paid 2 1/2 times more in mortgage payments than the price of our house, added to the cost of renovations and upkeep at a rough guesstimate we have invested five times more than the price on the deeds

paddyann54

People seem to forget that if they paid a mortgage over 25 years their house cost a lot more than it said on the deed!Sometimes several times the cost

Yes, very true. Good point.

Has anyone worked out the actual cost of their property?

Witzend

One thing we’re doing legally, is putting a fair bit of cash into S&S ISAs for the Gdcs. They will have access at 18, which is slightly worrying - eldest is now 9, dh and I will be 84 and 85.

So in case we’re gone by then, TBH not unlikely, I shall be leaving letters pleading with them not to blow the lot!

We contribute to the savings accounts my daughter has set up for her two children.
She made me laugh when she said she wasn't happy about our granddaughter potentially being able to blow it all on shoes and handbags when hers matures, can't think why she would think anyone would do this! 🤔 🤣

I think the argument about avoiding taxes because of governments spending money on things we don't agree with is dangerous, as well as a bit childish.

If enough people don't like what a govt spends money on it can be voted out of office in 5 years. Until then we put up with it as the alternative is anarchy.

Perhaps income tax could have better bands/thresholds. Move the bottom band to 20k and put in a 50% rate, allow people to pay now. Money for the government now, not after people die.

Earnings are taxed, why tax again at death?

Don't know if it would apply to me, but if it did I would want it to go to my family, I've paid taxes earning it and saving it and agree with Maddyone, the government waste money on things I don't agree with. I was left with two children to bring up, juggling jobs, no holidays through their childhood as friends in same position went on benefits. In those days you couldn't get money off a spouse if they hid their assets or disappeared and you hadn't the money to find them, people smoke and drink and take foreign holidays, that's their choice why should those that don't be penalised? Two people on exactly the same income will spend differently.

I agree 100% with MOnica and NotSpaghetti (though complacent might be a better word than smug).

From the most self-centred point of view the best way to secure a better world for everyone's great-grandchildren will be to have better funded public services and that means our generation contributing fairly.

One thing we’re doing legally, is putting a fair bit of cash into S&S ISAs for the Gdcs. They will have access at 18, which is slightly worrying - eldest is now 9, dh and I will be 84 and 85.

So in case we’re gone by then, TBH not unlikely, I shall be leaving letters pleading with them not to blow the lot!

choughdancer

M0nica

Our estate will be liable to IHT and beyond giving children odd sums at various times, we are doing nothing to avoid it.

We have both had fortunate lives, passed our eleven plus, went to university with maintenance grants, had good careers and confortable retirements. All in a country where the rule of law prevails. We are quite willing for IHT to be paid on our estates after our deat. We received so much, we are happy to give back.

Well said MOnica I completely agree. I cannot see how progress can be made on reducing the number of people living in poverty in society (including those who are working extremely hard but not being paid much!) if everyone tries to avoid tax. I know it is not illegal to do so, but I think it is immoral.

I completely agree. with both these posts.

M0nica

Our estate will be liable to IHT and beyond giving children odd sums at various times, we are doing nothing to avoid it.

We have both had fortunate lives, passed our eleven plus, went to university with maintenance grants, had good careers and confortable retirements. All in a country where the rule of law prevails. We are quite willing for IHT to be paid on our estates after our deat. We received so much, we are happy to give back.

Well said MOnica I completely agree. I cannot see how progress can be made on reducing the number of people living in poverty in society (including those who are working extremely hard but not being paid much!) if everyone tries to avoid tax. I know it is not illegal to do so, but I think it is immoral.

A lot of people who have 'made' a lot of money on their houses were given any years of tax relief on mortgages, so maybe it's only fair that they pay it back in the form of IHT?

People seem to forget that if they paid a mortgage over 25 years their house cost a lot more than it said on the deed!Sometimes several times the cost

Labour increasing IHT?.

They probably won’t, more likely IHT will remain frozen
They might withdraw the extra allowance for couples that took it up to nearly £1m.

Most of this speculation has been about those very wealthy who use loopholes/trusts to avoid/evade IHT

NotSpaghetti I am not smug

It would have been so much easier if we hadn’t decided to set up our own business. I could have stayed at home and raised our five children. Instead we worked 6/7 days a week, juggling children, homework and all else family life entails with no relatives nearby to help.

I am definitely not smug, exhausted definitely!

Dinahmo we have spent double the amount we payed for our house on renovations inside and out. All of this out of our money that has been taxed.

I really do not agree with your argument that just because our home might have risen in value it should be taxed on our death.

We made sacrifices over the years as have many others, our choice I know, but it’s a big fat NO to Labour increasing IHT.

Do people think that those people with nothing, didn't work hard - the same as anyone else.

Even those with nothing to show for it (maybe especially those) can have worked extremely hard.

There is a lot of smugness around "hard work" it seems.

Just saying.

I feel, like M0nica, that those that have to pay it are actually the lucky ones.
Same for higher rate income tax and so on...

ronib

Dinahmo well a couple of points spring to mind - it was hard work saving for a deposit on our first house. We went without quite a bit to find enough money to put down. Also it was fairly touch and go on a single income- husband worked and I stayed home with our children- when mortgages rose to 15 percent. Easy to forget and rewrite history. Although of course it’s quite possible now to make a loss on buying and selling flats (first purchase) and there’s no tax relief on that.

Wasn't it for most of us? My DH worked 7 days per week during most of the 7years that we owned it - either on his restoration work or on the house. I worked out that it would be cheaper for him to work on our house rather than work at his business and pay tax and then pay builders etc out of taxed income.

It was our first house, which we bought when we were 32 years old. We had been living in London and paying rent for about 12 years. So yes, I do know how hard it is to save for a deposit. In our case it was 25%.

I'm not quite sure how I'm re-writing history.

Since you lived through the 15% mortgage interest period you must remember that many people were in negative equity for a time. The ones who lost out were the ones who had a reason to sell, such as moving for work and they unfortunately would have sold at a loss. The majority sat it out until prices rose. The same will apply now to those whose flats have gone down in value.

I’m in the lucky position that although we own our house and additionally have some money set aside which keeps us very comfortable, we simply don’t have enough assets to pay IHT. I feel like you GrannyGravy, in that if we had sufficient funds to attract IHT, I would do everything legally in my power to prevent any government getting their hands on it. We worked hard to achieve what we have achieved, and to set our children on the road to successful lives, and of course we paid our taxes and still do, and anything that maybe left when we die is for our children, not the government! And I don’t give a damn about the profit our house has gained over the 35 years we’ve lived in it, everyone else’s house has gained value too, and I don’t expect that profit to be used for causes I don’t support ie putting migrants in hotels.

Dinahmo well a couple of points spring to mind - it was hard work saving for a deposit on our first house. We went without quite a bit to find enough money to put down. Also it was fairly touch and go on a single income- husband worked and I stayed home with our children- when mortgages rose to 15 percent. Easy to forget and rewrite history. Although of course it’s quite possible now to make a loss on buying and selling flats (first purchase) and there’s no tax relief on that.