Burnhams Tax on Cash ISAS and Death tax

I somehow think I'll be paying my own care costs. Whatever is decided re care will take forever to organise and most likely will be very poor.

I agree that whatever happens might be too late for most of us, but things can't go on as they are. People already try to cheat the system - it's wrong, but I can understand why they might. Knowing that everything you've worked for could be taken from your children when those who haven't worked (or who have spent everything as they earned it) will get the same care as you free of charge is difficult, and it must be tempting to try to find ways around it.

There needs to be a fair way of doing it, and really that has to mean free at the point of use, rather than some paying and others not. How that is funded is the tricky bit, and I think that asking all of us to pay something is fair. We won't all need social care, but to me, everyone paying a bit to help those who do is reasonable.

I'm happy to pay a flat rate of 10% on my whole estate. That should work out fairly. Those with huge estates will pay much more than those with smaller ones. Not happy about double bubble ie 10% the IHT as well.

David49

It needs to be levied before IHT on all estates if it's going to raise a significant amount 10% has been mentioned.
So if you leave £50000 your estate will pay £5000, if it's £1m it will pay £100,000.
If we really want close the wealth gap every one has to lay something.

ISAs, future interest will pay tax past tax won't, speculation yes and we don't know the details but it would do a lot to correct the inequality we have.

There will in future be tax on the income from Stocks and
Shares ISAs

Cash ISA's interest will continue to be tax free. We DO know that detail because it was spelled out.

No it wasn't. Th tax on S&S ISAs is only on cash held before investment, and is to plug a loophole. That has been explained on this thread as well as in the news.

Aveline

I'm happy to pay a flat rate of 10% on my whole estate. That should work out fairly. Those with huge estates will pay much more than those with smaller ones. Not happy about double bubble ie 10% the IHT as well.

I agree that it would be fair for all to pay something, but if the 10% levy is deducted from the estate of the better off, and their heirs still pay IHT on what is left over £1m that doesn't seem unfair to me.

My understanding though, was that when AB mooted the idea a while ago it was to replace both IHT and stamp duty, but until something becomes policy we just don't know.

I have given most of my money away to my children - I only have my house, which I understand is free from IHT and a minimum amount of savings.

You don't have to have much to amass £1million if house is included these days. I'd still be v angry at govt taking 10% plus IHT.

crazyH

I have given most of my money away to my children - I only have my house, which I understand is free from IHT and a minimum amount of savings.

It all depends on the value of a house whether IHT will be payable though doesn’t it? As for giving money away, then the 7 year rule applies. I’ve always tried to strike a balance between helping my daughter and family financially and keeping savings and investments for myself to have choices and options open.

I can't find any figures that state the probate value of ALL estates, we know that only 4% of estates actually pay IHT, and the revenue raised is around £4-5bn. A 10% rate on all would raise a substantial amount, much more, the heirs of any estate would still receive 90%. Because everyone benefits from the health and care system everyone should contribute according to their means, we are a very long way from that at present.

If we want to level the wealth of the population keeping the existing threshold is justified it has been accumulated by unearned means.

"Death tax" is a political term often used to describe inheritance tax or proposals to replace it.

According to recent reports, Andy Burnham has discussed the possibility of replacing the current inheritance tax system with a flat 10% levy on estates to help fund a National Care Service. Under the reported idea:

More estates could pay something than under the current inheritance tax system.
The rate would be much lower (10% rather than the current top rate of 40%), but it could apply more broadly.
No final policy has been adopted, and the idea is being discussed as part of wider social care reform.

Supporters argue that:
Social care needs a long-term funding solution.
A broader, lower-rate levy could spread the cost more evenly.

Critics argue that:
More ordinary families could end up paying tax on inherited assets.
The phrase "death tax" is used by those who view it as politically unpopular.

The Treasury has banked more than £336 million recovered from people who thought they had a good wheeze to avoid inheritance tax. In the 5 years from 2021 to 2026 around 2,500 assets worth £840 million were given to relatives in the hope that the donor would live 7 years and no inheritance tax would be due. But they all fell foul of a rule called GROB - a A Gift with Reservation of Benefit. If you give something away but continue to use it or have the benefit of it then it is not a gift and when IHT is worked out it counts as your property.
Paul Lewis - Aug 26 Money News.

I really don’t envy anyone involved in producing proposals for addressing the social care system. But it’s not even just about how to finance it is it but what would be provided and at what level. Cross party working is essential obviously as is proper consultation across a huge range of stakeholders. I wish I felt more hopeful that it would all happen

I agree Tulip Tree. I can only see it being some sort of insurance but there are many people cleverer than me so I'll just stay interested for now.

GrannyGravy13

Thank you Graphite, for clarifying what initiative the OP is referring to

And it is nothing to do with Andy Burnham, it was a change introduced by Rachel Reeves.

It's not just the care system that needs more money, we need to improve the water system, grow the economy, invest in the regions and defence. We can only do this with big money we have it in the UK but at present we use it to enrich the families that already have enough.

It's not 'ours' to use!
Of course there needs to be much done to improve defence and vital infrastructure but the economy needs smart planning rather than knee jerk.
eg in Scotland the imposition of an extra percentage of tax on 'higher earners' has led to a £22 million fall in tax take.

Aveline

It's not 'ours' to use!
Of course there needs to be much done to improve defence and vital infrastructure but the economy needs smart planning rather than knee jerk.
eg in Scotland the imposition of an extra percentage of tax on 'higher earners' has led to a £22 million fall in tax take.

This is why a tax all estates is going to be useful because clearly everyone cannot avoid it because most of the value is going to be property or pensions.

Aveline

It's not 'ours' to use!
Of course there needs to be much done to improve defence and vital infrastructure but the economy needs smart planning rather than knee jerk.
eg in Scotland the imposition of an extra percentage of tax on 'higher earners' has led to a £22 million fall in tax take.

No Aveline this is not a fact . Dan Niedle the author of the report is quite clear that the headlines are misleading ( quelle surprise). This is a good read for anyone who cares about being well informed
www.futureeconomy.scot/posts/587-has-scotland-s-48-tax-rate-really-reduced-public-revenue

Social care is in drastic need of reform and in order to do it properly it will cost money. I admire AB for grasping the nettle - it will probably be political suicide for him but hopefully he will get some changes in place before he is booted out.

An estate tax (death tax) makes sense; but I hope it will be accompanied by a concerted effort to plug tax loopholes and to make sure the super rich make a proper contribution.

Tuliptree

Aveline

It's not 'ours' to use!
Of course there needs to be much done to improve defence and vital infrastructure but the economy needs smart planning rather than knee jerk.
eg in Scotland the imposition of an extra percentage of tax on 'higher earners' has led to a £22 million fall in tax take.

No Aveline this is not a fact . Dan Niedle the author of the report is quite clear that the headlines are misleading ( quelle surprise). This is a good read for anyone who cares about being well informed
www.futureeconomy.scot/posts/587-has-scotland-s-48-tax-rate-really-reduced-public-revenue

So, Neidle claims that far from raising revenue for public services, Scotland’s decision to increase its top rate of income tax to 48% may actually have reduced tax receipts.

The main counter arguments are:
The data period is too short
Migration (of wealthy people) evidence is weak
Behavioural responses may be temporary
Comparison with England is uncertain because of the basic factual differences.
HMRC's own estimates still predict positive revenue
Fiscal drag complicates interpretation
Revenue isn't the only policy objective

David49

I can't find any figures that state the probate value of ALL estates, we know that only 4% of estates actually pay IHT, and the revenue raised is around £4-5bn. A 10% rate on all would raise a substantial amount, much more, the heirs of any estate would still receive 90%. Because everyone benefits from the health and care system everyone should contribute according to their means, we are a very long way from that at present.

If we want to level the wealth of the population keeping the existing threshold is justified it has been accumulated by unearned means.

Yes, this is how I understood the proposal to work. A small amount from everyone, rather than a larger amount from the richest 4% of the population.

I'm always rather surprised at how many people complain at the thought of IHT when so few pay it. If this scheme replaces IHT and stamp duty, I agree with Luckygirl that there should still be a concerted effort made to plug tax loopholes and ensure that the better off pay more than the less well-off.

I also agree with David that there are many more things to 'solve' than social care, but I hope that (if implemented) the 'death tax' stays ring-fenced for that, whatever happens elsewhere.

It seems workable to me. Could it be ringfenced for social care?

I especially agree about closing the loopholes.

The best form of ring fencing would seem to be defining it as an insurance scheme albeit compulsory. I like the idea of everyone paying a set % as it can engender a sense of solidarity and the ‘right’ to claim if necessary. The (few) times I’ve claimed on house or car insurance I had the right to do so and in years (most of them) when I’ve not claimed, then I’ve felt that’s great.

I tbink , if it goes abead, it will be a good measure and fair.