Should we be more open to a wealth tax?

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.

I agree with everything you say Doodledog.

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.

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?

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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

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.

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.

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.

Aveline

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.

Exactly 👏👏👏

I don’t suppose it matters, but our discussion about inherited wealth at our level of wealth - very little compared to the level of wealth the wealth tax is proposing to capture.

Aveline

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.

And it will be taxed again if it exceeds the £325,000 or £500,000 threshold (whichever is applicable) for IHT. And it will continue to be taxed as your legatees spend it.

There is nothing magical about inherited unearned income which qualifies it for special treatment.

Yes, yes - brilliant video should be seen by all!

I think inheritance tax feels different from other taxes because we save and go without to provide for our children. When we buy a Cadbury bar, we don't think of the 20% VAT that goes to the treasury. With inheritance tax, there's this visceral feeling that, despite my best efforts, my child will suffer while the money goes into this black hole and disappears. We try to pass on as much money as possible because without it, our kids and grandkids have no hope to own a home or have a decent standard of living.

Inequality has grown immensely since the '80s. Neoliberal capitalism created a system where a few "winners" in society take most of the wealth, leaving ordinary people and governments in poverty. We allow privatised water companies to pay out profit shares while they are pumping literal sh*t into our rivers. We allow billionaires to bribe politicians. This needs to stop. Our taxes, no matter the rate, should go towards public services, not making the rich even richer. Affordable housing, sustainable energy, a working NHS... Not giving hundreds of millions to Michelle Mone for defective PPE. If we don't act now, our children and grandchildren will be nothing but serfs to the rich.

For many of us who have bought a house, the house has earned more money than we have. Yes, we've paid mortgages but if we hadn't bought our home we would have paid rent. If we don't require expensive care before we die, our home will constitute the largest part of our estate for IHT purposes, with careful planning and no unexpected death, we could probably avoid paying much in IHT and eventually pass on £1million to our children, most of that will have come from inflationary house prices. This is fueling the division between those who have and those who don't have parents who own their homes. It is completely unfair and IMO is not a recipe for a happy balanced society.

So how to have a balanced society? It's impossible.

foxie48 so it’s our fault for being homeowners- really 🤦‍♀️

I am taking no issue with the IHT threshold for single people.
I reiterate my claim that the 4% figure of legacies attracting this tax is likely to rise very sharply in the next decade.
In many parts of the country, a modest house already is worth £500k and may well be lived in by a single person.

Aveline

So how to have a balanced society? It's impossible.

It was on its way to becoming possible after WW2. A period that now looks more like a blip in the 'normal' state of affairs. However, looking at how it was achieved can give us some idea of how it might be achieved in the future. The main mechanisms seem to have been far higher levels of taxation for the wealthy and greater union strength for negotiating improvements to wages and salaries.

This was put a stop to by Thatcher who both reduced taxes paid by the wealthy and reduced the perceived power of the unions, both by legislation and deindustrialisation. This might appear to be a very simplistic analysis but the correlation is undeniable. Inequality has grown, wages have stagnated and the wealthy have prospered.

The only thing stopping us learning from the post war period is political will and a determination to reduce the power of the wealthy to influence policy. IMO...

I like your post, Apple3pie.

I understand your feelings about IHT but I still feel that the ability to leave £325k (or more) plus 60% of the remainder of your estate to your heirs is reasonable.

I do despair at the grasp that neoliberalism has on our governments. Especially as the feelings of poverty and helplessness it engenders is driving significant numbers of the population to support right wing populists who can garner support by virtue of the fact that they are an unknown quantity when it comes to governing a country.

Thatcher had to do what had to be done. The country was at risk of being brought to a standstill by the unions. There would have been nothing for anybody if she hadn't. The country would have been ruined. Equally awful though so maybe that's what you want?

Thatcher cause huge and permanent damage to this country and its' people.

The cult of the individual.

Aveline

Thatcher had to do what had to be done. The country was at risk of being brought to a standstill by the unions. There would have been nothing for anybody if she hadn't. The country would have been ruined. Equally awful though so maybe that's what you want?

That her find what needed to be done but went too far, the entire steel, coal, shipbuilding, motor industries didnt have to be abolished. They needed investment, what we didn't need was give aways, gerrymandering votes and short term plans. It wast just Thatcher Blair did nothing to change the damage then crashed the economy to boot.

Burnham certainly has a huge task on his hands.

Well, I would like to point out that Mrs Thatcher's policies might just have contributed to the significant problem in a shortage of social housing, and her enthusiasm for privatisation could, perhaps have led to some changes that were unlooked for:
I live by the sea, and in the past, we didn't need an organisation called Surfers Against Sewage.