Inheritance tax too high or too low?

ED

Ideally, the poll would offer a 4th category :

(D) increase the threshold to £500,000 before a deceased's estate has any Inheritance Tax deducted

At first, on seeing the option "C. double it", I thought this meant double the threshold (to £570,000) - not a proposal of 80% tax on wealth beyond the existing threshold.

Andy_Davies

ED wrote:

Ideally, the poll would offer a 4th category :

(D) increase the threshold to £500,000 before a deceased's estate has any Inheritance Tax deducted

At first, on seeing the option "C. double it", I thought this meant double the threshold (to £570,000) - not a proposal of 80% tax on wealth beyond the existing threshold.

That would be virtually the same as eliminating it, the majority of people who 'pay' inheritance tax have estates that are worth less that £500,000 (according to the IFS). The 'rich' don't pay it because they can afford to re-arrange their affairs to reduce it.

I'm not convinced that the Government would lose that much revenue if they abolished it anyway:

- there would be cost savings in the medium term as the civil servants who administer it could be laid off
- many people woukd spend the money they'd inherited, so increasing VAT receipts
- others might trade up the property ladder increasing stamp duty reciepts
- others may choose to save or invest it increasing income tax or capital gains receipts.

Trouble is politicians don't like abolishing taxes, only creating new ones!!!

Gorgeous_George

(C) Double it

Without IHT or with less IHT, the pressure on the housing market will only increase, causing prices to rise further. Children born to poor parents would be condemned to a life of poverty. Children born to wealthy parents would be lazy. Either way, society would suffer.

With IHT at 100%, perhaps people would be encouraged to enjoy the fruits of their labours.



GG

billshep

All very well saying spend your money b4 you die, trouble is we can't predict when we are going to die....
Put another way, if you spend all your money by say 75, then who pays for the next 25 years if you live to be 100???

Abolish IHT and let people do what they want with their left over money and assets, not give it Mr Brown to fritter away!

ED

Interesting ideas, Andy Davies, about alternative revenues for the Government if Inheritance Tax is abolished. I feel tax on spending should be increased, tax on savings and investing decreased.

However, I'm not so sure raising the IHT threshold to half a million pounds would be "virtually the same as eliminating it". People with property above that value (including home, furniture, car, investments and savings) do exist in the UK.

The current threshold is far too low. Almost anyone who owns the house, bungalow or flat in which they live is over that level across much of London and the South East of England, for instance.

£250,000 is the minimum cost, typically, of a 2 or 3 bedroom property in the SE + surroundings. So if a man dies leaving his wife the home, furniture, his investments, shares, etc, worth say another £250,000 collectively, then when the widow in turn dies her estate is heavily taxed. Two people have scrimped and saved, perhaps for their whole lives, so it seems unfair their beneficiaries have little left.

Gorgeous George – I too am anxious about escalating price of housing. Perhaps this is partly due to inadequate tax on 'second homes', or residential property investment by people lucky enough to receive massive bonuses for working in the City, etc. According to the Telegraph some of them are this month receiving hints their annual bonus this Christmas will be about a million pounds each!

Perhaps 'second homes' should be exceedingly heavily taxed by local councils...?

Titan

If I could trust the goverment to do the right thing with this money (ie. Lower income tax for low earners, increase benefits for people that REALLY need it) basically redistribute the money from those who don't need it (the dead person don't need that money does he) to those who do, then I'd vote for an increase in inheritance tax.

No one really wants to pay tax, I am not happy to see a substancial amount of my earnings going "nowhere"! But we all enjoy the benefits that this brings to our society, things like FREE roads to go anywhere we like, free healthcare, police, firefighters, rubish collection, schools, sick pay, maternity pay, other benefits, and a long etc. This all has to be paid from somewhere and that is taxes!

Imagine having to pay for every time you go to the doctor (or paying for a private insurance), or paying for every time you take a road, or every time you use something that now we know as "public"... if you go to counries where this is not available you will see what I mean when I say that we are privileged to have what we have.

If Inheritance tax is abolished don't think that they wont tax us some other way, like increasing income tax, or tax on savings, capital gains tax, VAT or whatever they see fit to cover the bill of our way of life.

As it is, we, as a country, are already in heavy debt to maintain the lifestyle we currently enjoy, I think higher inheritance tax is a less painfull way of paying towards this debt than, say, a raise in income tax!

As I pointed out before, a dead person doesn't need his money no more, at present there is no charge when passing an estate to the deceased's spouse or dependants (I think dependants are also included up to when they leave formal education not absolutely sure) so they will be taken care of till they are able to fend for themselves (dependants) or die (spouse).

Just my 2cents

Titan

Nosmig

As Elona said in the first reply (and others have expressed something similar), we are taxed when we earn, on what we spend, and on any savings.

I paid into 2 pension schemes (State and Company) and continue to pay tax on my retirement income. My wife and I scrimped and saved to buy a house - and now risk a big chunk of all we've worked for going to the Exchequer when we both snuff it. In a perfect world, we'd have children (and grandchildren perhaps) to pass it on to - but what do you do when your son dies in a motor accident and you have no grandchildren?

I realise the Government needs money if we are to have a good health service, good education, adequate public transport, and benefits for those who need support - and the fairest way is to tax both earnings (graduated so as not to penalise lower levels) and on spending (the more you can afford to spend, the more tax is paid) but NOT on savings - we must encourage people to save for their own future needs.

Snak_2

I was divorced a few years ago. One of the reasons (that led to it) was that my wife could not stand the idea of being poor when we were old, and my pension advisor screwed up my pension. She got the house.

I have been thrown out of my new home by my new partner because I was spending too much time working to pay for it. She has the house.

I've just been informed (in my very expensive-to-rent abode) that in a few years I will inherit an aunt's bungalow. She has left the bulk of her money to unregistered charities so inheritance tax will be due on it. In fact, the bungalow will have to be sold to pay it.

Now tell me why inheritance tax is fair.

As to the title of this post, here's my tuppence worth (that is, my 1.2p worth after inheritance tax):

I'm taxed on everything I earn (Income Tax). What's left after I've earned it is mine. However, if I want to spend it, it costs me more tax to do so (VAT). If I want to live somewhere, I have to pay more tax (Council Tax). If I want to heat my home or cook, then I pay more VAT on that. If I need to go to work to earn this money I have to pay road tax and tax on petrol. If I should ever be able to afford to go on holiday, there's airport tax. One has to wonder why it's worth bothering - OK, so if I'm taxed on anything I want to do whilst I'm alive, the only thing that makes it worthwhile is the thought that I could donate something to my offspring so they don't have to struggle like I did. Oh no, of course, I'm taxed again 'cos I died.

scrummy_mummy_2

IHT...forget it...I stayed at school and furthered my education, I moved jobs and worked hard for promotions, I made sacrifices to earn it, I've bought stuff with it, it's mine, mine mine.....Gordon Brown is no more than a grave robber!
I've heard that our esteemed Mr B has caught onto the trust thing and now there will be a tax of 6% gross per annum on any funds placed in trust for children if they do not receive it at 18...pressumably he'll get it anyway in university tuition fees which he'll be able to track through CTF bond registrations...the thing with IHT is that you can't actually take a stand and go to jail to make your point for not paying because you don't even get the chance!
Of course it's not redistributed......socialist by another name or not, some pigs are always more equal than other pigs!
The mists are clearing now...special place here I come.......

nemo183

going2die_rich wrote:

C - Double it!

A lot of the people dying off now haven't earned all the money they are leaving behind! It's due to the property prices increasing so much that they have vast amounts of money to leave to their children.

True. Except because house prices have risen so much, it's their children that now can't afford to buy unless they have access to this money.

I think the inheritenance tax should be higher else it's just keeping the rich rich.

Wrong. The rich will stay rich, as they can afford any number of avoidance measures that mean they will never pay a penny of I.T.

Why do those that are getting the inheritance money think they are entitled to money that others have earned. Everyone should be earning their own money without expecting huge amounts from what their parents have earned. That money should be put back into society to help those that need it.

Err, say that again? I work and save because I want to help myself and my family. Along the way, I pay taxes which help us all. I think you would be hard pressed to find any culture or society that did not agree with the idea of allowing inherited wealth. Like it or not, our economic system relies on the concept of building wealth, and is currently the only show in town. Do you really think that the state would have the slightest idea how to make the best use of additional amounts of inherited wealth, or even be able to decide on "those that need it"?

Parents pay for the upbringing of their children and help them throughout life, even nowadays paying for deposits of their childrens first homes! They shouldn't be paying for their children when they are dead too.

Yes, it does seem to be a fact that children, particularly when young, find it
hard to support themselves - especially now so many coalmines have closed and there are less chimney sweeps. Seriously, whilst I agree they shouldn't have to give so much support to their children who want to buy a house, it seems rather inevitable since it's the massive rate of house inflation that has put property out of the reach of so many.