Burnhams Tax on Cash ISAS and Death tax

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

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.

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.

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.

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.

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.

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

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.

"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.

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.

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.

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.

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.

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.

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.

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.

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 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 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.

If you gift your house to your children and continue to live in it rent free then HMRC will treat it as a gift with reservation of benefit. The asset remains part of your estate for Inheritance Tax.

Similarly it would be considered deprivation of assets in a claim for funded care.

But aren't some people doing that now Aveline, signing their houses over to their children to avoid having to pay care costs to ensure their children have their inheritance?

It's a gamble though. I'd be raging from beyond the grave if I'd had 10% taken and the IHT too. In fact if that was to happen I'd do all the smart things possible to avoid it. Just what the govt doesn't want to happen.

We don't know that's being mooted, do we?

My understanding - possibly wrong - is that if everyone pays 10% it would bring in more than the current system whereby the top 4% (wealthwise) pay 40% on everything over £1m (or less if not part of a married couple or a widow).

If the proposal is that IHT is paid on top, it wouldn't be unfair, as presumably the estate would be valued after the levy had been taken, so there would be less to assess, and those paying it would have been covered if they needed social care, too.

We do need to see the detail, though.

I agree but not fair to also use inheritance tax too.

Aveline

If rather close the wealth gap by moving everyone's wealth up rather than taking from those that have saved.

Me too, but I would also like to see social care doing the same.

If we all pay 10% (which we won't notice as we'll be dead) into a fund that pays for social care for those who need it, then those who have saved won't have all their savings eaten by care costs.