Inheritance Tax Article MoneySavingExpert.com Discussion

Lightning_2

Andy_L wrote:

Even if they made up the lost revenue with a 1% on income tax?

Up until the large increases in house prices, most ordinary people weren't subject to IHT, so the IR weren't getting any tax from them. Because they haven't increased the tax free level in line, considerably more people are now subject to IHT. This in my view is a stealth tax, because it isn't being taken from your pocket now it doesn't have the same impact. Don't lose sight of the fact that we have all paid a lot of money in taxes through our lives, and if we have saved for a private pension will continue to do so until we die. Don't we deserve to do what we like with our own money, including leaving what is left to whoever we wish.

Lightning_2

Andy_L wrote:

Even if they made up the lost revenue with a 1% on income tax?

Up until the large increases in house prices, most ordinary people weren't subject to IHT, so the IR weren't getting any tax from them. Because they haven't increased the tax free level in line, considerably more people are now subject to IHT. This in my view is a stealth tax, because it isn't being taken from your pocket now it doesn't have the same impwact. Don't lose sight of the fact that we have all paid a lot of money in taxes through our lives, and if we have saved for a private pension will continue to do so until we die. Don't we deserve to do what we like with our own money, including leaving what is left to whoever we wish.

Lightning_2

If you are married you can include a Nil Rate Band Discretionary Trust in your will, which takes advantage of the Nil Rate Band on the first death. If you have enough money it can be put into the Trust, mostly the Trust is owed the amount of the Nil Rate Band at the point of death, and the survivor has use of the assets/money until they die. The Trust has to be reimbursed with the amount equal to the promisory note, and the remainder of the second estate will only be subjec to IHT above the current Nil Rate Band.

Tiggs_2

Andy_L wrote:

Even if they made up the lost revenue with a 1% on income tax?

1% of income would dwarf any IHT revenue - the amount raised is pretty small.

Lightning_2

You may have already had this suggestion from other replies. One thing you can do, which only incurs the cost of the Solicitor drawing it up (but it is worth it in the end), is to do remake your Will to include Nil Rate Discretionary Trusts for both of you. When one of you dies, it allows you to take advantage of the first persons nil rate band, for eg. half of the value of your joint assets. The survivor can keep all the assets, but has a promisory note to repay the sum of the Nil Rate Band Discretionary Trust on their death. Therefore, when you die, this falls out of your estate, and you have your own £285000.00 (currently) IHT free allowance.

A solicitor who handles this type of Trust will be able to advise you and explain how this works. I have just been involved helping a friend, whose husband did one of these when he knew he was dying of cancer. They, like you, are not rich, but he wanted to protect his money so that as much as possible would be there for his children when his wife dies. This is option might be better than giving half of your house to your children, although the point about the Council taking it is one to be considered.

If you give money to your children to buy a house, all except your Annual Tax Free Exemption will fall into the 7 years rule, and if you die in this time, the amount given will be considered as part of your estate. Keep a record of gifts given, and try to use the £3000.00's where possible. It is £6000.00 if you haven't used this for the previous year. Therefore you could both give away £12000.00 completely tax free if you haven't used the allowance the year before. The probate documents ask for gift in the 7 years to be listed, and you can offset this allowance.

Lightning_2

I was very impressed with your reply, and how good of you to take the time to pass on information gained by your experience, which I am sure was far from easy. I am sure the recipient was very grateful.

Unnecessary comments made in reply to some other questions posted later on this page, made my blood boil, why are people even reading questions to do with inheritance tax if it doesn't concern them. I thought therefore, that your response deserved a pat on the back.

Lightning_2

Regarding Andy's comment about the 1% tax increase if IHT was abolished.

I had an afterthought. The revenue from the thousands of people drawn into potential IHT recently due to house prices, will not be reach the exchequer for many years, as they have to die first. As people are living longer, this might be 40 years or more. My point is that the Chancellor can't be building into his calculations currently, so abolishing IHT in respect of these people wouldn't increase basic taxes at all.

The majority of people in this position have paid 22% tax on their income, therefore, if this is forming part of their estate and is taxed at 40%, there is only 38p left from every pound they started with. When the residue of their estate, is passed on, £285,000.00 plus anything else left over, it is conceivable that this will place the recipient into IHT, when it will be taxed at 40% again-do you think this is fair.

Having read the IHT article and commented on the forum, do you detect that people aren't keen to pay it? You must be far more generous spirited than myself and hordes of others who would rather the 40% stayed within the grasp of our children, families or whosoever we wish to inherit our estate.

home_alone

Lightning wrote:

Having read the IHT article and commented on the forum, do you detect that people aren't keen to pay it? You must be far more generous spirited than myself and hordes of others who would rather the 40% stayed within the grasp of our children, families or whosoever we wish to inherit our estate.

Sounds like its me you are talking about, I would do anyhing (nearly) than give money to G Brown, but my brother in law who is mega rich could not care in the slightest, he says "I will be dead let them fight over it".

Anyone clear on what the tories will do to IHT if they get back into power?

gary

Andy_L

Lightning wrote:

The majority of people in this position have paid 22% tax on their income, therefore, if this is forming part of their estate and is taxed at 40%, there is only 38p left from every pound they started with. When the residue of their estate, is passed on, £285,000.00 plus anything else left over, it is conceivable that this will place the recipient into IHT, when it will be taxed at 40% again-do you think this is fair.

For most "new" IHT payers it's house price inflation thats bought them into the band. That gain hasn't been taxed before (except possibly via stamp duty if they've ever traded up) and in many cases (my parents for example) the owners will have benefited from MIRAS.

Tiggs_2

at the time of the last election the conservative policy was to up the NRB a fair bit and (if i recal) up the tax on estates over a certain point (£1.5m i think)

while those are possibles anyone that thinks the first thing a tory gov would do is to tackle IHT is nuts......with all the issues in the UK there is no way they would deal with the one that affects a small number of people in (mostly) the south because their houses are so expensive!

they may as well bring back Thatcher and have a few sex scandles as a better way of introducing themselves to the nation!