Inheritance Tax

The issue is a "no-brainer" for me: it is clear that there is a hidden agenda being pushed by the ultra/very wealthy who would save significantly if IHT was abolished.

The argument that a much bigger proportion of the population is having to pay IHT means the government should abolish it does not hold water.

Mick is right: just increase the threshold. Personally I think £10m is far too high ... I would prefer the threshold to be raised in line with one of the government indices. Although not used now for Capital Gains Tax (taper relief now applies), the taxation of chargeable gains in companies is relieved by indexation, so why not index the IHT threshold in a similar way? Instead of using a general inflation factor (i.e. the chancellor puts a wet finger in the air to see which way the wind is blowing), the threshold should be indexed to the housing market (nationwide) - this is the biggest single asset in most families' estates.

Of course, there should be some re-alignent first to eliminate the price inflation in the housing market these last ten years or so - say start at £500,000 now and index from there year on year.

Abolish IHT and let the mega-rich keep their fortunes ad infinitum: no way!

Or you could move to the Isle of Man

Given what the property market has been doing over the last few years, the prospect of being significantly walloped is on many more people’s radar. Off the back of my father’s death a few months ago, it’s a subject that my mother and I have been forced to face up to, revolting topic though it may be for many reasons and the emotional baggage that goes with it.

Proposed increases in the threshold over the next few years won’t do much to significantly change the situation. Coming as it does on the back of a property boom it is inevitable that the topic is now a hot one. Redwood’s proposal smacks somewhat of ghoulish opportunism. Be that as it may, what I want to know is how they propose to claw back the loss through other taxation. Free lunches are a myth, particularly when it comes to politicians.

Cheers

Harry,

what do you mean, claw back a loss? They are not giving money back to us, just taking less away in the first place. Simple answer, reduce expenditure.

Start with the 800,00 extra civil servants and other govt employees that Blair and Brown have taken on (nice way to buy votes though).

quote:

Originally posted by Mick Parry:

We need to encourage drive and enterprise as well as the work ethic and passing money to your children or charities is certainly a big driver.

Regards

Mick

The offspring of your average Hooray Henry will have even less work ethic if inheritance tax is abolished.

Abolishing inheritance tax will inflate already ridiculously high property prices

The only people who pay Inheritance Tax are those who have not worked for it. When my (and my wife's) estate becomes liable for IHT, my kids can pay a part of their windfalls in tax.

I thought you had to pay the tax up front before the estate could be released?

I have tried drafting several replies to this thread but they all turned into something of a rant. So I'll keep it concise.

I do not agree with the principle of inheritance tax!

Peter

quote:

The argument that a much bigger proportion of the population is having to pay IHT means the government should abolish it does not hold water.

Why doesn't it?

quote:

Abolish IHT and let the mega-rich keep their fortunes ad infinitum: no way!

The mega-rich don't pay inheritance tax as their tax advisors are far too smart to let that happen.
John

quote:

I do not agree with the principle of inheritance tax!

Nor do I. We pay tax all of our lives, often several times over on the same money. Being robbed again when dead is just plain wrong.
John

Pointless exercise. IHT is a voluntary tax for most people. I spend half my life helping people not pay it.

There should be no allowance for IHT. Tax the lot.

Nigel

quote:

quote:
The argument that a much bigger proportion of the population is having to pay IHT means the government should abolish it does not hold water.


Why doesn't it?

Taxation should apply to all and everyone in the country in the same way, subject to relief for the inability to pay. That principal is held within the tax system by having graduated rates. Thus for IHT there are two bands: 0% within the IHT threshold and 40% above said threshold. To suggest that because more people are subject to IHT than originally planned, by government when the tax was introduced, it should be abolished is - as the saying goes - like throwing the baby out with the bath water. The desired effect of removing those from the IHT 40% tax band to the IHT 0% tax band is easily achieved: just raise the threshold.

quote:

quote:
Abolish IHT and let the mega-rich keep their fortunes ad infinitum: no way!


The mega-rich don't pay inheritance tax as their tax advisors are far too smart to let that happen.

I acknowledge fully that this tax is often referred to as a voluntary tax and that the "mega-rich" (my term) can - I believe - buy protection from paying it in one form or another. This is not satisfactory but it is better than not having the tax at all.

If a family wants to avoid paying the tax then funds can be distibuted during the lifetime (yes I accept that most deaths are not planned). Why is that the argument for abolishment is along the lines of:

I've worked and paid tax on my earnings throughout life so why should the government take 40% of my estate when I die? Surely my children should get the money without paying further tax. If the parent is so concerned that his/her offspring gets 100% rather than 60% of the excess and 100% of the threshold amount why not distribute it, year by year?

The actual argument is, of course, I've built this "fortune" - be it bricks & mortar, investments, cash or whatever and I want to keep it all to myself until my dying day (the children can fend for themselves in the meantime) and only then do I want them to get 100% of my estate.

But do you have to die before you can pass an inheritance on to a child? Tax loophole alert!

Chaps

Overall an interesting response. I liked Jo Sharps statement best

"what do you mean, claw back a loss? They are not giving money back to us, just taking less away in the first place. Simple answer, reduce expenditure." .... I wish Jo would come on in here more often, he is one of the greats.

My own view is that one of the best incentives for men is that they should be allowed to pass thier wealth onto their children. The bulk of the inherited tax will probably go into property, either in the UK or abroad as second homes. All this increases our wealth and influence in the global economy.

History has shown that we are the wisest spenders of money and governments the most foolish.

Regards

Mick

Answer the question Mick. How does inherited wealth create drive and initiative?

I feel that inherited wealth could well create the conditions that will allow drive and initiative to flourish if they have been stifled by a lack of cash but then so could a bank loan if the bank though that the idea was runner. Found or windfall money be it from a lottery ticket or the proceeds from a bequest could allow a vanity type idea or business to get off the ground as the cost of capital is zero but you still need a good or profitable idea in the first place otherwise I do not think that the cash has created anything at all.

Malky

Roy has answered the question. It is easier to make money when you have money behind you.

Inherited money usually comes to those in their mid forties / fifties when maturity and common sense prevail. This is the age when people get off their asses and work and with money behind them, they are less dependant on banks and that is a great incentive and driver.

Regards

Mick

quote:

Taxation should apply to all and everyone in the country in the same way, subject to relief for the inability to pay.

Right. So in the past virtually no one paid IHT because the rich were too clever and too well advised and the average person owned a house that was worth substantially less than the threshold.

Then house prices went up, the IHT allowance didn't and a whole swathe of ordinary people were caught in a tax trap not based on their ability to pay.

Raising the threshold or scrapping it altogether effectively means the same thing as the outcome will be the same.
John

Mike,
after thinking some more about the subject a couple of other ideas have come to light.

An entrepreneurial approach might be to have people conduct business funded by inheritance tax via an audited limited liability or not for profit organization with any loss being set against the amount of the bequest. With laws, procedure and accountants already in place and given that the number of people being subjected to inheritance tax being much smaller than the number of existing limited liability or not for profit organization I expect the industry could swallow the additional work without too much trouble.

A Found Money approach would be to just pay the inheritance tax as now and the test to see if the entrepreneurial gene has skipped a generation or not would be if the person invest in shed loads of lotto tickets or not.

So on the assumption that a government (of any persuasion) isn't going to just say "well we didn't need the revenue anyway", which other tax would you happily pay more of?

"According to the government's own estimates [pre-budget report 2005], inheritance tax revenue in 2005/06 will be £3.3bn and it is expected to rise to £3.6bn in 2006/07. This is higher than the anticipated revenues from beer and cider duties (£3.4bn) for 2006/07 and petroleum revenue tax (£2.1bn). It is on a par with anticipated government revenues from capital gains tax (£3.6bn)."
http://www.hbosplc.com/media/pressreleases/articles/halifax/2006-03-18-00.asp

Exactly Steve. It might be avoidable depending on prudent planning and ciurcumstanes, but any government will plan to get revenue from those who for some reason don't manage to do this. So if they lose that, where does the offest come from?

Cheers

Yes but believe it or not, about a quarter of the '07 collection is from one estate(!)

More people now realise they can avoid IHT.

The IHT allowance will be about 17% higher in a couple of years.

And maybe, just maybe, house prices have peaked (I suspect city bonuses may be lower this year which means fewer trophy homes and the trickle on effect around London and the South East of lower prices), prices are falling in The Midlands and other regions around the UK, more houses are being built (albeit on flood planes...) to increase supply, allegedy.

Borrowing from banks is going to get tougher to help prove they're not lending irresponsibly (the enigma, wrapped in a shadow, wrapped in an extremely convincing, irresponsible, diluted but widespread and far reaching problem that is the unrated lending debacle).

It's harder to avoid petrol, booze and fag duties, or VAT, income tax or CGT and easier and more direct to enforce them. Some politicians are perhaps realising this and whether they intend to follow through or not, are keeping the door open I suspect.

We get taxed on what we earn and taxed again on what we spend (less a few exceptions of 0 rated VAT).

Isn't that enough? Can't the govt leave family estates alone? I would much rather that they increased duty on discretionary spending such as tobacco and alcohol.

in the states, i believe the threshold is $600k, apparently a fraction of yours in the uk. of course most wealthy families can shelter their capital. we also have a nasty thing called the AMT, or "alternative minimum tax." was originally meant to catch those who had most of their money in tax-free bonds or whatever; unfortunately, now many middle class persons are getting ensnared in this.