Should we be more open to a wealth tax?

But it's not free money. In my case it will be what's left of carefully saved and looked after proceeds of a life's work. It's already been taxed over and over over the years.

I understand why that must seem wrong, but assume the thinking is that both parents have the £500k allowance, so children of divorced parents can inherit twice. If both parents could leave a million that wouldn’t be fair either.

Realistically, inheritance is not ‘fair’ anyway. Many people leave nothing as their assets are consumed by care costs. Parents in England can disinherit their children. Some have nothing to leave anyway.

I am not against inheritance - I hope to leave my children some money - it’s a natural instinct, I think. But they understand that that might not happen and are standing on their own feet. If we avoid care and other misfortunes and there is money left to leave they will get free money, subject to taxation, but they aren’t planning their futures around that expectation.

Doodledog, I expect that the percentage of people paying inheritance tax to rise significantly over the next few years.
My modest semi in the South East is worth about £450k, so, as I am a long divorced woman, my inheritors will be paying tax if I leave any money.
This group, single people with a home worth just about the threshold, I foresee growing larger each year.

Unearned income is already taxed, (rental, interest earned, profits on stocks and shares (not ISA’s) along with CGT).

Money is taxed along every step of the way, apart from the exception you note, GG13, which was a political choice to incentivise saving. There is absolutely no reason why the person receiving it as unearned income via inheritance shouldn't also be taxed on it.

It doesn’t incur NI which is a tax on employers and employees

Interesting this. How would you feel about people who don't pay NI being charged for, or not entitled to, the services it supposedly funds? which are ' NHS, State Pension, contributory benefits.'?

I am a firm believer that we should be allowed to pass on our worldly goods to our nearest and dearest without the state taking a punitive proportion

The state allows up to £500,000 tax free. I think that most people would be happy with inheriting that alone, let alone 60% of the remainder of the estate's value. The wealthier people are the more likely they seem to be resentful about returning some of their wealth to the state (which, I remind you, is most likely to have issued the money which purchased it all in the first place. Foreign inheritances being different, of course, but no doubt taxed in the originating country).

'Ownership' of wealth is a bit of a nebulous question really

Message deleted by Gransnet. Here's a link to our Talk guidelines.

My understanding is that only 4% of people pay IHT with the current system (which is odd, given that we are always hearing of millionaire pensioners, but still), so what percentage would pay if the nil rate were raised to £3-5m?

Basgetti

LemonJam

Inheriting a property from someone who has died is unearned income and the lucky recipient should rightly pay tax at a fair level.

I still think a threshold of £3-5 million before IHT becomes due is way too high.

Is that in England? I understand it to be £650,000 for spouses here in Scotland.

Current IHT threshold in the UK I understand is £325 for a single person I believe.

For a married/civil partner couple, the first that dies can transfer their allowance to their partner so becomes a combined tax free allowance of £650

Plus if you leave main home to a direct descendant, children or grandchildren you get an additional £175- pushing the threshold up to £500 for a single person and £1 million for a married couple.

GrannyGravy13 would like to see the IHT threshold raised to £3-5 million however and I responded I feel that is too high - it and exacerbates inequality.

I agree with everything you say Doodledog.

Inheritance is the ultimate in unearned income. Yes, the deceased may have earned the money, but by definition the heirs have not.

I am not against inheritance per se, but I do believe that recipients should be taxed at a higher rate than someone who has worked for their money. There is already a nil rate of a million pounds for those who inherit from parents. Google tells me that someone on minimum wage, working a 37.5 hour week would take 40 years and 4 months to earn a million pounds. How can it be reasonable for someone not to be taxed after inheriting (ie being given) more than it would take that length of time to earn? The worker would pay tax on half of their income, which, (again according to Google) would be £24784.50 pa for a 37.5 hour week, and would also be contributing whatever they do to earn their money.

Pushing surplus wealth into the hands of those who are already wealthy just perpetuates inequality. Add to that that the chances are that the carer on minimum wage not only pays tax, but may also pay rent to someone who inherited the house or the money to buy it, and it conjures up pictures of the Sheriff of Nottingham taxing the poor to give to the rich.

LemonJam

Inheriting a property from someone who has died is unearned income and the lucky recipient should rightly pay tax at a fair level.

I still think a threshold of £3-5 million before IHT becomes due is way too high.

Is that in England? I understand it to be £650,000 for spouses here in Scotland.

The recipient is already fortunate not to have to pay any tax on the inherited sum below current thresholds on what is essentially unearned income They only pay tax above the threshold level for something they have not earned

That seems fair to me- but I appreciate others may hold a different view.

Inheriting a property from someone who has died is unearned income and the lucky recipient should rightly pay tax at a fair level.

I still think a threshold of £3-5 million before IHT becomes due is way too high.

Doodledog

GrannyGravy13

I haven’t got a problem with inherited wealth.

I have got a problem with IHT, in my opinion it kicks in far too low.

I would start it at £3-5 million, and on a sliding scale.

Also if the money invested has been earned through legal means it would have already been taxed. Any interest paid has to be declared to HMRC, and is taxed at the appropriate rate (20% 40% 45%) unless of course it is in an ISA which successive governments have encouraged.

That has avoided answering my question, which was part of my reply to the one you asked me.

Why should people who work be taxed but unearned income not attract the same (or higher) levels of tax?

Also, IHT is a tax on those receiving it, not those passing it on, so by definition they haven't earned it, regardless of how the money came into the hands of the deceased.

I will try again.

I have not said that unearned income shouldn’t be taxed.

Unearned income is already taxed, (rental, interest earned, profits on stocks and shares (not ISA’s) along with CGT). It doesn’t incur NI which is a tax on employers and employees

I am a firm believer that we should be allowed to pass on our worldly goods to our nearest and dearest without the state taking a punitive proportion.

IHT should be on a sliding scale not a cliff edge as currently, and as I posted upthread be increased to £3-5 million.

I do not know how to make my views any clearer 🤷‍♀️

GrannyGravy13

I haven’t got a problem with inherited wealth.

I have got a problem with IHT, in my opinion it kicks in far too low.

I would start it at £3-5 million, and on a sliding scale.

Also if the money invested has been earned through legal means it would have already been taxed. Any interest paid has to be declared to HMRC, and is taxed at the appropriate rate (20% 40% 45%) unless of course it is in an ISA which successive governments have encouraged.

Tax is payable on unearned interest in a savings (deposits often from already taxed earning)s account. above a fairly low threshold.

Why should those that inherit property from others, that have made no contribution to that property whatsoever not pay IHT? a £3-5 million starting point for paying IHT , in my view is far too high and would increase inequality

Excellent questions Doddledog 👏

Here I am, drawn back in again!

I don't have a huge problem with wealth, I have a problem with huge wealth. As MaizeD says, our economy is unbalanced.

I have said it before on this thread, if some people are successful and become super rich, well good for them, we can't all be successful entrepreneurs and yes, some of them have started businesses which employ a lot of people. However, I don't believe they are all secret philanthropists. There have always been the "haves" and the "have nots" but the gap seems to be getting wider and I fear that if something doesn't change in our tax system many more people who now consider themselves to be "just about managing" are going to be drawn into poverty.

Excellent questions, Dd

GrannyGravy13

I haven’t got a problem with inherited wealth.

I have got a problem with IHT, in my opinion it kicks in far too low.

I would start it at £3-5 million, and on a sliding scale.

Also if the money invested has been earned through legal means it would have already been taxed. Any interest paid has to be declared to HMRC, and is taxed at the appropriate rate (20% 40% 45%) unless of course it is in an ISA which successive governments have encouraged.

That has avoided answering my question, which was part of my reply to the one you asked me.

Why should people who work be taxed but unearned income not attract the same (or higher) levels of tax?

Also, IHT is a tax on those receiving it, not those passing it on, so by definition they haven't earned it, regardless of how the money came into the hands of the deceased.

I don't have a huge problem with wealth. I accept the fact that the distribution of money,* which is a public good, provided by the state*, will never be even because some people will always have entrepreneurial instincts and some people will always be happier to be employed and leave the entrepreneurial bit to their employer. And some people will need some sort of state support because of disability or the simple fact of lack of employment opportunities.

Communism failed because of it failed to recognise these differences and assumed that the state could control the entire direction of an economy. There were some good aspects to it, like the promotion of excellent education and healthcare for all, but it still developed a rampant hierarchy of wealth and privilege along with draconian methods of keeping the populace under control.

But modern capitalism has also failed in ways that we experience now as the economic theories which drive it have also produced a rampant hierarchy of wealth, privilege and power which intend just as determinedly as the Communist hierarchies did to maintain the status quo. And that status quo is to keep the wealthy as wealthy as is humanly possible.

My contention is that, if money is a public good, issued by the state (which it is, because any logical enquiry as to the origin of money will bring us back to that point) there is no compelling reason why a particular section of society should have the monopoly of it. It is possible for it to be more equitably distributed as the post WW2 period demonstrated.

IMO the Beveridge Report was a glorious humanitarian document which showed how the state could care for all its citizens both physically and materially. Data from that period shows that its implementation was working, albeit slowly and progressively when informed by the economic theories of one of the acknowledged 'greats' of the economic profession. Keynes factored money and human nature into his analyses in a way that the current orthodoxy has rejected.

I'm sorry that I bore everyone, but our economy is unbalanced, unbalanced by a preponderance of wealth in the hands of a few at the top and real poverty at the bottom. I believe that we could achieve a far better balance, and a more thriving economy, but while while wealth is applauded and defended by those whose money is actually being taken by the wealthy I will continue to speak against it and support its curtailment.

Beyond the massive wealth inequality, an even bigger issue is the political power of the rich. They are able to buy/manipulate/threaten politicians into serving them rather than their constituents. So called "independent" think tanks funded by the wealthy influence government policies, the media run campaigns supporting the narrative etc.

GrannyGravy13

Doodledog

I’m not angry at them either, but think they should pay more tax.

In the U.K. the top 1% of tax payers contribute approximately 27%-29% of all income tax receipts.

The top 10% contribute close to 60%

Source - Google

I assume you want higher earners to pay the same rate of tax on unearned income as earned income?

The % simply show just how much money they have - and that is not taking out the money that is shielded one way or another from tax.

All I want is for everyone to pay their fair share, and the share agreed by society, - not what the wealthy think they ought to be paying.

I then want the revenue to be used to fund the NHS, social care, education etc. and invested into the economy, I also guess (although I’m not happy about it) we need to invest more in defence.

I haven’t got a problem with inherited wealth.

I have got a problem with IHT, in my opinion it kicks in far too low.

I would start it at £3-5 million, and on a sliding scale.

Also if the money invested has been earned through legal means it would have already been taxed. Any interest paid has to be declared to HMRC, and is taxed at the appropriate rate (20% 40% 45%) unless of course it is in an ISA which successive governments have encouraged.

I would like to see a ceiling (don’t ask me where it should sit, as I can’t reasonably imagine a billionaire budget) above which tax is taken at a significantly higher level than for those on average incomes. And yes, it should include unearned income too.

People earning over £125k or so get taxed at 45%, and whilst that is a very good income, people are still working for it, as medical consultants, dentists, even some head teachers. Not all of them will have significant assets, and the younger ones will have mortgages and families to support.

Why should those whose income comes from having money not be expected to pay far more than they do?

Doodledog

I’m not angry at them either, but think they should pay more tax.

In the U.K. the top 1% of tax payers contribute approximately 27%-29% of all income tax receipts.

The top 10% contribute close to 60%

Source - Google

I assume you want higher earners to pay the same rate of tax on unearned income as earned income?

I’m not angry at them either, but think they should pay more tax.