Why is Inheritance Tax the Most Hated?

[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?

[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.

[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

[Complex]

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.

Right, that is what many people do and certainly the best approach but that doesn't remove the underlying issue. Anyway, why WOULD someone save stringently, keep on top of costs, deny themselves pleasure, be frugal and deal with the stress of independence when all of it is completely unnecessary.

Of the people I know with financial well-being, very few of them are in that position purely from their own hard work. They never present these things to be the case but a lot of this type of privilege is not visible and very downplayed. Those who are privileged have a vested interest in downplaying it because they don't want to undermine their achievements. One simply cannot pretend that having the knowledge of an (at some point) due inheritance makes no difference to attitudes and planning.

Slightly tangential to the IHT itself and more a point of privilege across the board but no/low IHT just concentrates wealth in the small pockets it already exists and reduces social mobility.

[MB2]

I think the time has come for some sort of "windfall" tax on the baby boomers who have enjoyed huge tax free gains on their housing - this could be at death but it should make clear the years affected and then the percentage could be far more reasonable if carried by a larger percentage of the population.

They could then use this money to protect people from the lottery of "dementia tax" which is probably a larger incentive to avoid IHT now than the certainty of IHT.

[Alansmithee]

I'm not sure what defines the 'very wealthy' but the IHT net is catching far more people now than ever before. Primarily the value of the family home, but when you add in investments, savings, pension funds, etc - and the potential capital from life insurance policies - there'll be more and more of us liable for this tax in the future.

R

I'm on my phone so limited in searches I can do but HMRC figures estimates is that it impacts about 40,000 people or about 0.0009% of the population (or something like that) - it's irrelevant to pretty much everyone (by real world not internet) in the country.

[Tifa]

That might have been the case up to a few years ago, but achieving a significant IHT saving is now very difficult.

Have a look at business property relief arrangements.
Money outside of estste after 24 months.
100% control of funds (unlike trusts)
No need for 7 year potentially exempt transfer window
No gift with reservation rules etc.

Not difficult at all if you approach it correctly

[draftsmann]

Have a look at business property relief arrangements.
Money outside of estste after 24 months.
100% control of funds (unlike trusts)
No need for 7 year potentially exempt transfer window
No gift with reservation rules etc.

Not difficult at all if you approach it correctly

I’ve built products for one of the best known providers of packaged BPR solutions, so you can infer that I know about it.

Enough to know that the “money” (which isn’t relievable- it has to be used to buy relievable assets such as trading company shares) is certainly not “outside of estste” or even “estate” at any time. The point of the relief is that it reduces the tax on qualifying business property that very much remains part of the estate.

I hope you don’t advise clients on this.

[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?

[Tifa]

I’ve built products for one of the best known providers of packaged BPR solutions, so you can infer that I know about it.

Enough to know that the “money” (which isn’t relievable- it has to be used to buy relievable assets such as trading company shares) is certainly not “outside of estste” or even “estate” at any time. The point of the relief is that it reduces the tax on qualifying business property that very much remains part of the estate.

I hope you don’t advise clients on this.

Business Property Relief has been an established part of inheritance tax legislation since 1976?
Once BPR-qualifying shares have been owned for two years, they can be passed on free from inheritance tax on the death of the shareholder.
Needs to be:
Shares in qualifying companies that are not listed on any stock exchange.
Shares in qualifying companies listed on the Alternative Investment Market (AIM).
An interest in a qualifying business (e.g a partnership.)

[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.

[draftsmann]

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?

Why would an individual’s watches not be treated as part of his estate?

To the second poster, people have been jailed for IHT fraud.

[draftsmann]

Business Property Relief has been an established part of inheritance tax legislation since 1976?
Once BPR-qualifying shares have been owned for two years, they can be passed on free from inheritance tax on the death of the shareholder.
Needs to be:
Shares in qualifying companies that are not listed on any stock exchange.
Shares in qualifying companies listed on the Alternative Investment Market (AIM).
An interest in a qualifying business (e.g a partnership.)

BPR was indeed introduced in the Finance Act 1976, albeit under the capital transfer tax regime as the tax was only modified and renamed inheritance tax a decade later.

Posting snippets of regurgitated information is fine but I haven’t noticed your confirmation of whether or not you hold out as competent to advise professionally on the subject matter under discussion.

[Stanford]

Why would an individual’s watches not be treated as part of his estate?

To the second poster, people have been jailed for IHT fraud.

* I assume they would, but might be more easily 'hidden' in order to minimise the exposure to IHT.
* I wouldn't be jailed...it would be up to my family to declare all of my estate (or not), assuming there was anything left to declare.

[draftsmann]

* I assume they would, but might be more easily 'hidden' in order to minimise the exposure to IHT.
* I wouldn't be jailed...it would be up to my family to declare all of my estate (or not), assuming there was anything left to declare.

Has it occurred to you that HMRC can and do review forums such as this one and other “special interest” online fora concerned with high-value toys?

“Here’s my SOTC”
“Here’s my new incoming”
“FSOT as I fancy something new”
“I’ll take that please at asking price- that’s one of my grails”

How “hidden” are you?

[Stanford]

Has it occurred to you that HMRC can and do review forums such as this one and other “special interest” online fora concerned with high-value toys?

“Here’s my SOTC”
“Here’s my new incoming”
“FSOT as I fancy something new”
“I’ll take that please at asking price- that’s one of my grails”

How “hidden” are you?

Have you seen any such posts from me recently?

[draftsmann]

Have you seen any such posts from me recently?

I have to confess I don’t stalk you at all. Would you like me to?

[Stanford]

I have to confess I don’t stalk you at all. Would you like me to?

That's up to you, just don't send me chocolates

[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.

[JasonM]

Why would an individual’s watches not be treated as part of his estate?

To the second poster, people have been jailed for IHT fraud.

Ah, I think I confused it with capital gains tax. ( That may be wrong too ! )

[draftsmann]

Ah, I think I confused it with capital gains tax. ( That may be wrong too ! )

CGT is a different matter Jason. “Machinery” assets are considered to be wasting/depreciating and are not subject to CGT. Watches fall into this category, as do motor cars (including classic or collectors’ cars).

[JasonM]

Thank you.

[aldfort]

Right, that is what many people do and certainly the best approach but that doesn't remove the underlying issue. Anyway, why WOULD someone save stringently, keep on top of costs, deny themselves pleasure, be frugal and deal with the stress of independence when all of it is completely unnecessary.

Of the people I know with financial well-being, very few of them are in that position purely from their own hard work. They never present these things to be the case but a lot of this type of privilege is not visible and very downplayed. Those who are privileged have a vested interest in downplaying it because they don't want to undermine their achievements. One simply cannot pretend that having the knowledge of an (at some point) due inheritance makes no difference to attitudes and planning.

Slightly tangential to the IHT itself and more a point of privilege across the board but no/low IHT just concentrates wealth in the small pockets it already exists and reduces social mobility.

One should never anticipate an inheritance, doung so will very often lead to tears. Failing that it can lead to overly obsequious behaviour which is worse in many ways.

[aldfort]

Leaving all of your estate to charity (on second death if you are married) will remove all potential problems AFAIK.

[Andyg]

CGT is a different matter Jason. “Machinery” assets are considered to be wasting/depreciating and are not subject to CGT. Watches fall into this category, as do motor cars (including classic or collectors’ cars).

Which perhaps explains why people are spending millions on watches and classic cars and the arse has dropped out of Antiques (with some exceptions).

[Chinnock]

The only sure thing in this life is Death & Taxes.

At least you’re “living” proof the saying is correct

[guinea]

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.

Exactly.

Increase IHT and force people to take responsibility for their own life, just as you say.

[P.Sheridan]

That about sums it up !!
My mum and dad divested themselves of all assets(other than cash) in their 70’s.

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

QUOTE]

[mangoosian]

Barring the inept spending of the windfall by the government, I have no qualms with IHT being charged to all and sundry. And that means all. No exceptions to royalty, etc. That would level the playing field somewhat to a more equal society.

But the reality is those rich enough will domicile abroad. That is the crux, there will be some that will always get out of paying.

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[draftsmann]

But the reality is those rich enough will domicile abroad. That is the crux, there will be some that will always get out of paying

If you knew anything about the subject you’d know that is easier said than done. Today’s homework is to research Sir Charles Clore and report back to the class.

[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.

[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.

[mangoosian]

If you knew anything about the subject you’d know that is easier said than done. Today’s homework is to research Sir Charles Clore and report back to the class.

Not saying it is easy. I am saying it can be done (avoiding tax). And more easily done by those who can afford it (and where the saving is commensurate to the costs)

The fact that methods exist like trusts, etc to avoid tax means those methods are available to some that can afford them but not others and that creates a greater disparity.

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[Scepticalist]

Not saying it is easy. I am saying it can be done (avoiding tax). And more easily done by those who can afford it (and where the saving is commensurate to the costs)

The fact that methods exist like trusts, etc to avoid tax means those methods are available to some that can afford them but not others and that creates a greater disparity.

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With current IHT limits it's fairly certain that anyone likely to be affected by it can afford the couple of hundred quid it costs to get advice/setup on avoidance.

As mentioned previously, it is a tax that's only paid by people who fail to face, fail to plan or are not willing to plan for the eventuality.

[David_D]

With current IHT limits it's fairly certain that anyone likely to be affected by it can afford the couple of hundred quid it costs to get advice/setup on avoidance.

A "couple of hundred quid" wouldn't get you through the door of anyone with anything useful to say on tax planning! Cheap tax planning is probably worse than no tax planning.

[draftsmann]

Not saying it is easy. I am saying it can be done (avoiding tax). And more easily done by those who can afford it (and where the saving is commensurate to the costs)

The fact that methods exist like trusts, etc to avoid tax means those methods are available to some that can afford them but not others and that creates a greater disparity.

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Trusts aren’t a “method” to avoid tax. They have been used as a tool in some tax planning arrangements but that is far less common now than it used to be.

For the record, I’ve set up quite a few trusts for disadvantaged people who weren’t at all wealthy.

As for the wealthy having a greater range of choices and opportunities:
1. Get over it;
2. Congratulations on truism of the day.

[Kingstepper]

Trusts aren’t a “method” to avoid tax. They have been used as a tool in some tax planning arrangements but that is far less common now than it used to be.

For the record, I’ve set up quite a few trusts for disadvantaged people who weren’t at all wealthy.

As for the wealthy having a greater range of choices and opportunities:
1. Get over it;
2. Congratulations on truism of the day.

What's the difference between a tool and a method?

[draftsmann]

What's the difference between a tool and a method?

A plane or chisel won’t build a cabinet but can be used by a carpenter to help him do so.

[mangoosian]

Trusts aren’t a “method” to avoid tax. They have been used as a tool in some tax planning arrangements but that is far less common now than it used to be.

For the record, I’ve set up quite a few trusts for disadvantaged people who weren’t at all wealthy.

As for the wealthy having a greater range of choices and opportunities:
1. Get over it;
2. Congratulations on truism of the day.

Pedant alert. "Use of trusts" then.

You continue to miss the point. My previous points were about disparity and if IHT was being used to tackle it. The reality is it won't affect a certain segment. Fact.



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[Kingstepper]

A plane or chisel won’t build a cabinet but can be used by a carpenter to help him do so.

Splitting hairs really (as I am).

They're both mechanisms.

[gunner]

Splitting hairs really (as I am).

They're both mechanisms.

Splitting heirs surely...?

[Zigster]

I don't have a problem with IHT.

I might get a bit of an inheritance (minimal from my northern family; perhaps a bit more from my southern in-laws who have benefited from the property boom). But it will come at far too late a point in my life to make any meaningful difference to my finances.

Similarly, assuming either my wife or I live to a decent age, my kids should be well past the point of needing a hand-out from my estate (which would be captured by IHT given I won a large house in a south-east village with a nearby mainline station to London).

Most sentimental stuff (yes, including watches) can in practice be passed on anyway unless you have a really large and valuable collection of something. There is still a pretty large IHT free limit anyway so it's not as if IHT is 100% of the entire estate.

[draftsmann]

Pedant alert. "Use of trusts" then.

You continue to miss the point. My previous points were about disparity and if IHT was being used to tackle it. The reality is it won't affect a certain segment. Fact.



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Knowledgeable pedantry is more useful to the discussion than vague assumptions and regurgitated soundbites from the Guardian.

[Scepticalist]

A "couple of hundred quid" wouldn't get you through the door of anyone with anything useful to say on tax planning! Cheap tax planning is probably worse than no tax planning.

Odd, my experience is precisely the opposite of this statement. In all respects.

[Dave+63]

Leaving all of your estate to charity (on second death if you are married) will remove all potential problems AFAIK.

I only expect to die once! Or do you consider your wedding day to be your “first death”?

[bambam]

Yes Asset rich is the way to go imo.

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