IHT- how to avoid if you have enough wealth

You make a good argument there @ Doodledog, I concede that.
However, in their final house no owner gives a monkey's whether the improvements they make will be compensated by a rise in value of the house. You're not going to need it to up-size or to move, because you're dead. Likewise your beneficiaries are unlikely to give a monkey's as to how much they inherit either. You're absolutely correct in saying that tax is about numbers, not about emotions. BUT, and it's a big BUT, when your parents die, it's bad enough dealing with the overwhelming grief, (at any age), without the added of trauma of handing over a wodge of money of your loved ones' money to the government. That is why it is such an unpopular tax. That is why only a small minority are in favour. And from my perspective, that is why I object to people calling others "money grabbing, greedy, uncaring, smug", and any other words they choose to find, when they have never been in that situation. It's spiteful and smacks of envy.

I don’t see why that’s relevant though. As has been said before, prices are high because people are prepared to pay them. If fewer people had the money from inheritance then prices would fall.

Also, no tax is levied on the basis of whether someone acquired the money from the sweat of their brow or by simply living in a house for long enough. Tax is about numbers, not emotions. It doesn’t matter whether an income tax payer has earned their money from digging roads or writing a catchy jingle that pays a fortune every year in royalties - the taxman wants his cut regardless of the effort that went in.

Like everyone we paid high interest rates in the past. We have also (again, like everyone) maintained the houses we’ve lived in, and made improvements. In our current house we have had a new bathroom and kitchen and redecorated everywhere in the past couple of years. It has cost money, and at least some of that will be compensated by a rise in the value of the house. That’s perfectly normal, and not something that should be offset against tax.

We hope to cling to life for a while yet, and while we do we will enjoy having a pleasant environment to live in, which is why we had the work done. Why should our children (who have paid for none of it) not pay tax on whatever our estate is worth on our death? We could have kept the money in the bank- that would be taxed on that, too. Where is the logic in suggesting that allowances should be made for being an average earner or for modernising your living space?

escaped

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.

You're quite right, we bought a smallish terrace house in 1976 which we sold in 1980 for £50,000, around the time you were buying. These houses sell for £1.6 million now. It isn't in a fancy street in inner London and is just outside an ultra expensive SW London local area postcode where houses can fetch well over double this. As you say a £1 million pound house is pretty average for many outer London areas.

You’re right that not everyone can benefit from cash, but everyone benefits from good healthcare and education.

Even if we did give everyone a leg up, the fact that some would squander it shouldn’t mean that generations down the line are disadvantaged. Which is the point, really. I’m not advocating a total redistribution of wealth so that the playing field is level, as it wouldn’t stay that way for long, and if it did there would no incentive to try for more. But putting the playing field at the top of a hill that only some have to climb in order to play the game is harmful for individuals and the country as a whole.

it’s about trying to make the UK a fairer place
So start by setting an example by giving up expenses, subsidised meals and heating allowances and explaining exactly where that money will go and how it will help to make life fairer.
In my job, I can claim travelling expenses if I attend a course.
Of course if I do, it comes out of the school budget, which over time would mean cuts elsewhere.
If I choose to have a school dinner, I have to pay for the same size meal that the children get (primary school). I, like millions of workers take food from home, which I pay for.
Does being an MP make you incapable of preparing sandwiches or bringing food from home rather than expecting the taxpayer to fund your meals?

In an ideal world it would be good to see more equality, but giving everyone a leg-up doesn't always work. You could give two people £100 on the same day, and a day later one would have made £1000 or more, while the other would have lost the lot.
That's why I think social care and the elderly should be the main area on which to focus any IHT gained. At least its the same demographic from the same generation. I'd be happy with that, and could accept some reform then.

But this isn’t a game of ‘who had it harder’. It’s not about punishing anyone or rewarding anyone - it’s about trying to make the UK a fairer place.

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

Apart from the mortgage and renovations there is also maintenance on a house which isn't cheap. If you rent this is the landlord's responsibility.
We have friends who have always rented and now moan that they have to go on paying even though they are retired. I remember how they used to say that renting was cheap and they could take three holidays abroad every year, as well as run a very nice car. Obviously rent is no longer that cheap, but they definitely had a much more extravagant lifestyle than those of us who had mortgages, builders bills and maintenance to pay for.

Eggplant, we all know what illegal immigrants are but I will explain they are people who have no right to entry to this country but enter illegally, usually in boats.

I am sure that both you and Doodledog have entrenched views, so I will not continue to debate. I can only assume you both have backgrounds maybeof school/ university positions. Its my view that this means somewhat of a naivety of outlook.

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.

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.

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

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

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.

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.

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?

That makes sense, Norah, thanks.

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.

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).

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.

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.

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?

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.

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.

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.