Why is Inheritance Tax the Most Hated?

[noTAGlove]

I’m probably a prime person to suffer from IHT when I (and the missus) croak it, mainly because we have a fairly nice house on the London borders. But there’s a few reasons why I couldn’t give a monkeys about IHT;

1) All assets will go to the missus tax free, so she’ll be all good.

2) I’d like the kids not to be gifted a huge amount of money so they lose purpose, but rather they worked for there own future.

3) If you want to give it to the kids, do it well in advance and you’ll avoid IHT

4) I’ll be dead, kaput. Finito. My tax concerns will be somewhat tempered by this event.

I’d rather be angry about tax while alive and can spend it.

I find it strange that so many older people get so wound up about IHT. It seems like the Conservative party and supporters are absolutely obsessed about it.

[walkerwek1958]

I’m dying to avoid it if I can

[alfat33]

I gather equity release is becoming another way of reducing IHT, as some pension funds aren’t subject to it. Is that right?

[M4tt]

If there's you and your wife and a house, that's in excess of £850,000 before you pay a penny in tax. We did this last year when my mother died and my father moved in with us as he didn't want to live on his own. We didn't pay much at all in the end. As for giving it away early, it's got to be seven years and you can't benefit from it.

If he'd given or lent us anything towards our house, then moved tax would have been due again unless it was fully discharged.

[lenlec]

What do mean by giving it away early ? Is it gifting property to your children ?

[Crouchy]

Very complex subject and not really something you can cover in a thread. Residential nil rate band is very easy to lose and many people - including supposed professionals - get many elements wrong. Some people are less bothered than others and I get that, however, others spend their lives paying as little tax as possible. These people then do not estate plan and take a big hit. However, the big estate reducer now is the cost of long term care.
Historically informed wealthy people created lots of debt to reduce their estate liabilities, however, HMRC have cracked down on creation of false debt. In my experience, at present, more people who are asset rich are looking towards lifetime mortgages or long term interest only mortgages - these are slightly better than equity release.

[Pretzel]

Very complex subject and not really something you can cover in a thread. Residential nil rate band is very easy to lose and many people - including supposed professionals - get many elements wrong. Some people are less bothered than others and I get that, however, others spend their lives paying as little tax as possible. These people then do not estate plan and take a big hit. However, the big estate reducer now is the cost of long term care.
Historically informed wealthy people created lots of debt to reduce their estate liabilities, however, HMRC have cracked down on creation of false debt. In my experience, at present, more people who are asset rich are looking towards lifetime mortgages or long term interest only mortgages - these are slightly better than equity release.

Interesting thoughts cheers.

[David_D]

I gather equity release is becoming another way of reducing IHT, as some pension funds aren’t subject to it. Is that right?

Pension savings do fall outside your estate:

https://www.mattioliwoods.com/passin...nheritance-tax

[Kingstepper]

The OP asked why it is hated not how to avoid it.

[Omegamanic]

It’s hated because it is taking an asset that has been bought with taxed paid money, and then taxing it again - at the expense of the children of the prents that actually worked for it!

Personally, I’d leave my kids as much as possible, whether that was £100k, £1m or £100m. They can decide whether or not they want to keep it once it’s in their pockets and not the government deciding what they want to do with it.

[Bry1975]

Yes Asset rich is the way to go imo.

[bambam]

Yes Asset rich is the way to go imo.

Interesting discussion. What does 'asset rich' mean in this context?

[mk2driver]

It’s hated because it is taking an asset that has been bought with taxed paid money, and then taxing it again - at the expense of the children of the prents that actually worked for it!

Personally, I’d leave my kids as much as possible, whether that was £100k, £1m or £100m. They can decide whether or not they want to keep it once it’s in their pockets and not the government deciding what they want to do with it.

This is my issue with it even though I won’t have an issue as my family don’t have much wealth at all and neither do I at this stage

However I’m uncomfortable with the fact that you pay tax on your earnings, tax on the things you buy with those earnings or the investments you make and then that same money is taxed when you leave it to someone after you die

[The Doc]

Wait until you have to plan for French inheritance rules!

The asset inheritance is crazy, and the taxing and reliefs are fierce.

You end up with horrible dilution of ownership.

France, close by geography, far away in ideology

[thegreatdogwood]

It’s hated because it is taking an asset that has been bought with taxed paid money, and then taxing it again - at the expense of the children of the parents that actually worked for it!

Personally, I’d leave my kids as much as possible, whether that was £100k, £1m or £100m. They can decide whether or not they want to keep it once it’s in their pockets and not the government deciding what they want to do with it.

Well said and let's be clear there may well have been multiple layers of tax already paid before IHT where for instance income that has been taxed was then used to invest in an asset (say a buy to let) that was subjected to income tax on rent, an SDLT surcharge and the CGT on exit. Even savings attracts tax.

Just to add none of us know how long we will live or what our circumstances will be in old age. It's an aging population and all IHT does is encourage people to either spend or gift away money at a time they consider to be sufficiently ahead of expected mortality to not get caught by IHT rules with the potential to then become yet another "cost" to the state if they live to an age that they need to go into a care home but no longer have the funds to pay. For those that have been fortunate enough not to have been through the process with elderly relatives, the cost of nursing homes is simply eye watering.

[awright101]

It’s hated because it is taking an asset that has been bought with taxed paid money, and then taxing it again - at the expense of the children of the prents that actually worked for it!

Personally, I’d leave my kids as much as possible, whether that was £100k, £1m or £100m. They can decide whether or not they want to keep it once it’s in their pockets and not the government deciding what they want to do with it.

Spot on. I want my kids to have the best life possible. If leaving them a bit of cash helps them to achieve their dreams then I'm glad I could help. Not sure I could ever feel how the OP does

[Alansmithee]

From a population point of view - it's a complete non-issue and rather than being most hated is an irrelevance to most.

[gbn13]

From a population point of view - it's a complete non-issue and rather than being most hated is an irrelevance to most.

Agreed, as the yield to the Exchequer from IHT is negligible. It’s basically a political tax.

[Neil.C]

It’s hated because it is taking an asset that has been bought with taxed paid money, and then taxing it again - at the expense of the children of the prents that actually worked for it!

Personally, I’d leave my kids as much as possible, whether that was £100k, £1m or £100m. They can decide whether or not they want to keep it once it’s in their pockets and not the government deciding what they want to do with it.

Wisdom.

Like you I want to leave my estate to my kids not to the government to squander.

Of course after you are dead it won't matter but it's a nice feeling when you are alive.

[Complex]

It's hated because privileged people do not like the idea of anything that helps level the playing field between the haves and have-nots. They have a vested interest in reducing social mobility, something which IHT increases.

I and my peers are children of baby-boomers and by far the greatest influential factor on how our lives will pan out financially (and whether we will own a home) is whether our parents are leaving a large inheritance or not.

I and my friends all have similar upbringings, similar educations and similarly paid careers with similar trajectories. It is absolutely absurd that none of the above matters in the slightest in the face of our parents' varying levels of wealth and the corollary inheritances we will one day receive. I am one of the more fortunate but two of my friends will never ever be able to buy a house in the South East, that is not something which should be decided by the lottery of who their parents are.

It's not as if people who are due a large inheritance aren't already disproportionately privileged throughout their life and more likely to have had a better education, more stable family environment, less stress due to financial security. Again, I am someone who has had the benefit of all those things but I look across my shoulder to friends who are more capable than me and they will also always be more worse off because of the lottery of whose kids they are, anything that levels that, like IHT, is a good thing.

Admittedly the above is a broader point and not just IHT specific as anyone with their head screwed on knows how to get around it with the correct succession planning but IHT should not be something that is hated.

[gunner]

I think another reason IHT is hated is because it's tax on money you don't necessarily have. Most other taxes are levied at the point of receipt (income tax) or the point of spending cash (stamp, VAT etc.).

For families whose entire wealth is tied up in an illiquid, indivisible asset such as a house, having to sell it to pay the taxman is an emotive and painful event, just as you're dealing with another emotive, painful event.

[gunner]

It's hated because privileged people do not like the idea of anything that helps level the playing field between the haves and have-nots. They have a vested interest in reducing social mobility, something which IHT increases.

I and my peers are children of baby-boomers and by far the greatest influential factor on how our lives will pan out financially (and whether we will own a home) is whether our parents are leaving a large inheritance or not.

I and my friends all have similar upbringings, similar educations and similarly paid careers with similar trajectories. It is absolutely absurd that none of the above matters in the slightest in the face of our parents' varying levels of wealth and the corollary inheritances we will one day receive. I am one of the more fortunate but two of my friends will never ever be able to buy a house in the South East, that is not something which should be decided by the lottery of who their parents are.

It's not as if people who are due a large inheritance aren't already disproportionately privileged throughout their life and more likely to have had a better education, more stable family environment, less stress due to financial security. Again, I am someone who has had the benefit of all those things but I look across my shoulder to friends who are more capable than me and they will also always be more worse off because of the lottery of whose kids they are, anything that levels that, like IHT, is a good thing.

Admittedly the above is a broader point and not just IHT specific as anyone with their head screwed on knows how to get around it with the correct succession planning but IHT should not be something that is hated.

Or just take responsibility for your own life...? While I certainly know people who clearly operate in the knowledge of a parental safety net, I know plenty more whose financial well-being is purely the result of their own hard work.

[MB2]

It's hated because privileged people do not like the idea of anything that helps level the playing field between the haves and have-nots...they will also always be more worse off because of the lottery of whose kids they are, anything that levels that, like IHT, is a good thing .

Ironically I would say IHT encourages this - a major encouragement to the “bank of mum & dad” is the reduction in IHT that early gifting provides.



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[P9CLY]

It’s hated because it is taking an asset that has been bought with taxed paid money, and then taxing it again - at the expense of the children of the prents that actually worked for it!

In total agreement with you on this,I'd love an MP explain the legal theft of even more tax on the money you want to pass onto your children when tax has already been paid on that money and property!.

Personally, I’d leave my kids as much as possible, whether that was £100k, £1m or £100m. They can decide whether or not they want to keep it once it’s in their pockets and not the government deciding what they want to do with it.

[Brian]

It’s hated because it is taking an asset that has been bought with taxed paid money, and then taxing it again - at the expense of the children of the prents that actually worked for it!

Personally, I’d leave my kids as much as possible, whether that was £100k, £1m or £100m. They can decide whether or not they want to keep it once it’s in their pockets and not the government deciding what they want to do with it.

Exactly - me too!!!


B

[Brian]

Oops stutter - soz

[Kingstepper]

It's only the 'children's money' because that's how inheritance law has evolved, it's not a fundamental law of nature that it has to be like this.

Society could decide an estate 'died' with a person.

[David_D]

It isn’t a tax based on any principle (eg that you’ve had income or gains). It’s “How much have you got left? Right, we’ll have some of that.”

Why is wishing to give your estate away to family on your death so reprehensible that it deserves to be more heavily taxed than spending it? (And obviously I’m referring to the marginal part of your estate in excess of reliefs.)

If the concern is people making untaxed property gains on their homes, tax that. IHT is a blunt instrument that takes no account of what tax has already been borne on the funds comprising the estate.

The rules discriminate against single people and those without children.


If the late Duke of Westminster, with wealth of (from memory) c£10 billion, left his fortune with minimal IHT liability, why should the less well off pay?

There’s a current consultation on IHT and it’s bizarre that a virtue is made of the small % of estates that suffer it. It’s either a fair tax or not - whether it affects a few or many people is irrelevant.

[noTAGlove]

It isn’t a tax based on any principle (eg that you’ve had income or gains). It’s “How much have you got left? Right, we’ll have some of that.”

Why is wishing to give your estate away to family on your death so reprehensible that it deserves to be more heavily taxed than spending it? (And obviously I’m referring to the marginal part of your estate in excess of reliefs.)

If the concern is people making untaxed property gains on their homes, tax that. IHT is a blunt instrument that takes no account of what tax has already been borne on the funds comprising the estate.

The rules discriminate against single people and those without children.


If the late Duke of Westminster, with wealth of (from memory) c£10 billion, left his fortune with minimal IHT liability, why should the less well off pay?

There’s a current consultation on IHT and it’s bizarre that a virtue is made of the small % of estates that suffer it. It’s either a fair tax or not - whether it affects a few or many people is irrelevant.

When you’re pushing up daisies, fairness or not is meaningless.

Discrimination, unfairness, double taxation etc. What the fook does it matter when you are worm food.

[pacifichrono]

I think the issue of IHT is basically the same in the U.S. as in the U.K. There are two points of view: that of the family, and that of "society." IMO, both perspectives have merit and neither are 'right' or 'wrong.'

The parents and their offspring usually believe that the wealth accumulated by the parents is owned by the family and should not be retaxed just because part of the family is now deceased. One of the principal reasons the parents sought to accumulate the wealth was to enrich the lives of their children. Hence, as members of the family unit, the children are co-owners of the estate (unless otherwise stated).

Society looks at a person's wealth much differently: it was the parent(s) who worked to accumulate the wealth. That person's offspring are no more deserving of a proper start in life than poor children. It is up to the government to establish a tax that will at least make some effort toward leveling the playing field before the game even starts for the next generation.

Or something like that!

[GIB984]

That person's offspring are no more deserving of a proper start in life than poor children.

Deserving? Doesn’t really come into it does it? Surely everyone ‘deserves’ the best life they could possibly have but it doesn’t work like that does it?

If I work my roe out to make sure my son has a better start in life than I had isn’t that honourable and what a parent should strive for?

Do you prefer for the state to take everything and everyone start from scratch?

[pacifichrono]

Deserving? Doesn’t really come into it does it? Surely everyone ‘deserves’ the best life they could possibly have but it doesn’t work like that does it?

If I work my roe out to make sure my son has a better start in life than I had isn’t that honourable and what a parent should strive for?

Do you prefer for the state to take everything and everyone start from scratch?

The IHT certainly doesn't attempt to do that! I was just speaking from a philosophical perspective.

[Raffe]

I think the issue of IHT is basically the same in the U.S. as in the U.K. There are two points of view: that of the family, and that of "society." IMO, both perspectives have merit and neither are 'right' or 'wrong.'

The parents and their offspring usually believe that the wealth accumulated by the parents is owned by the family and should not be retaxed just because part of the family is now deceased. One of the principal reasons the parents sought to accumulate the wealth was to enrich the lives of their children. Hence, as members of the family unit, the children are co-owners of the estate (unless otherwise stated).

Society looks at a person's wealth much differently: it was the parent(s) who worked to accumulate the wealth. That person's offspring are no more deserving of a proper start in life than poor children. It is up to the government to establish a tax that will at least make some effort toward leveling the playing field before the game even starts for the next generation.

Or something like that!

Exactly my point of view. While I want my daughter to do well, I also see the point of taxing a windfall income for her. So better do some planning and reduce the tax within the legal limits.

[BillyCasper]

How such does Inheritance Tax contribute to total revenue? <1%?

I guess the most hated tax is the one you pay. PAYE and NI for most, by far the major source of revenue.


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[timlin]

One thought is that without IT wealth will over time become concentrated within a small portion of the population who will effectively use the country as a playground served and waited on by the poor.

This situation has in the past led to revolutions so best avoided!

[Templogin]

Recent indirect experience of French inheritance tax was at the 70% rate.

Care homes are costly as has been said. Try £1,000 per week for dementia care.

The problem with taxes is that governments of all hues spend them on items that some will always be against. Some will look at the £1,000,000 cruise missile just fired and ask if that could not have been better spent on feeding those in the foodbank queue, whilst others will consider the latter slackers and their kids probably deserve being there, and that we should have a strong foreign policy. We all want government not to waste our money, and subsidised alcohol whilst at work and luxury bulletproof cars may be unnecessary, but others may disagree.

[ralphy]

How such does Inheritance Tax contribute to total revenue? <1%?

I don't know the percentages, but last year the receipts hit £5.2bn.

I think the 'hatred' stems in part from the fact that it is seen as being paid for by the middle classes, the poor don't get hit by it and the rich can avoid it by giving assets away and/or paying advisers for schemes that get around it.

Dying with your last shilling in your pocket is the ideal solution, IMO. ;-)

R

[andy tims]

Why is it so hated?

If you'd seen your family being forced the sell homes & commercial property they worked hard to build up over a lifetime (whilst paying business rates, VAT & income tax) just to pay even more tax, you'd understand.

[casbar]

Why is it so hated?

If you'd seen your family being forced the sell homes & commercial property they worked hard to build up over a lifetime (whilst paying business rates, VAT & income tax) just to pay even more tax, you'd understand.

Exactly, work hard, pay all your taxes, do not be a burden on the state, then pay more tax on your death - golden. Of course people who have lived off the state and done nothing love IHT.

[Kingstepper]

Exactly, work hard, pay all your taxes, do not be a burden on the state, then pay more tax on your death - golden. Of course people who have lived off the state and done nothing love IHT.

You won’t pay tax on your death, you’re dead.

IHT is paid from your estate, the beneficiaries of which may well have done nothing and lived off the state.

[BillyCasper]

I don't know the percentages, but last year the receipts hit £5.2bn.

I think the 'hatred' stems in part from the fact that it is seen as being paid for by the middle classes, the poor don't get hit by it and the rich can avoid it by giving assets away and/or paying advisers for schemes that get around it.

Dying with your last shilling in your pocket is the ideal solution, IMO. ;-)

R

Around 7/10 of 1% then.

I guess it could be scrapped and a bit more put on tobacco, alcohol, betting, APD or landfill, or it could be seen to be a reservoir to be tapped.

I think it's also the middle class that stump up most of PAYE and NI and are the easiest to collect from.

I've had the very same idea as you. I've worked out how much I have, likely life span and how much I can spend per year to have nought left on my final day. I just need to get my other half to buy my share of the house, now, and then a final stretch of profligacy and decadence.

[Templogin]

I can remember a lot of new taxes, but can't remember them removing any taxes, at least not without an immediate replacement- luxury tax to VaT.

[VDG]

IHT is a daylight robbery. Just because HMG can. Hence if ppl can do something about it they will.

[Itsguy]

Surely Stamp Duty is at least equally hated? Due to the price of houses it’s become an absurdly high cost. There’s no logic to disincentivising people from downsizing, moving to larger houses as their families grow, moving to find work, or simply from living where they want. The only reason to keep it is that they are absolutely raking it in, but I can’t see any other logic to it.

[hogthrob]

1) All assets will go to the missus tax free, so she’ll be all good.

I'm not trying to sell you a will making service, but what happens if you both die at the same time?

[ralphy]

I'm not trying to sell you a will making service, but what happens if you both die at the same time?

IIRC, in law such an event is treated as the older person having died first. So the entire estate would pass to those nominated in the younger person's Will.
(If no valid Will, the the laws of intestacy apply).
R

[BillyCasper]

Leaving money for kids? How old are they these days when that happens? 50 to 60 year old kids?

I’d be okay if my estate paid higher tax in return for greater assurance around later life medical, social and home care.


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[JasonM]

I’ll help my kids to the maximum I can. I won’t want them to rely on it but if I’ve worked hard for it I want them to benefit when I’m gone.

Aren’t watches exempt from being taxed as part of a estate?

[Stanford]

I’ll help my kids to the maximum I can. I won’t want them to rely on it but if I’ve worked hard for it I want them to benefit when I’m gone.

Aren’t watches exempt from being taxed as part of a estate?

Ditto.
That's what I think - anything the tax man doesn't know about (and that doesn't officially form part of your estate) surely cannot be subject to IHT?

[wildheart]

18 years ago I nearly died, after surviving life support 3 months in hospital, the first post to land on my door step was a summons from HMRC for predicted tax.
The only sure thing in this life is Death & Taxes.