Inheritance tax too high or too low?

ariba10

MSE_Archna wrote:

Poll Title: Poll Started 19 September 2006: Inheritance tax too high or too low? Currently leave your wealth to family/friends and everything over 40% of £285,000 goes to the taxman (unless you follow the loopholes). So is this a tragedy stopping us from helping our families by paying tax on hard earned, already taxed money? Or should the tax be higher to stop perpetuating inherited privilege so the rich stay rich and the poor poor. Three simple stark choices; which is closest to your view?

A. No inheritance tax. Hard earned cash should all be passed on
B. Keep it as is. It's roughly the right balance at the moment
C. Double it. It'll lead to a society based on merit not inheritance

I think you meant 40% of every thing over £285,000?

nemo183

Good to read lots of different views on the whole IHT thing.

Just to relate this back to practical money saving, I'm sure that many people will have read an article in the papers recently regarding the cost of using a bank or solicitor to act as executor on an estate. I can't recall the exact figures, but on an estate of around £300,000, the average charge made from these "professionals" was around £20,000.

This is daylight robbery. Most estates consist of a property, some savings, and maybe some shares. Although acting as an executor can be a tad time consuming, not only are there a number of good books on the subject, both the Inland Revenue and probate office will bend over backwards to help you with the forms that need to be filled in.

The main reason given by banks and solicitors for the monumental charges they make is that it is a fact that anyone who acts as an executor has a personal and legal responsibility to act correctly, and can be held legally liable for not acting properly.

Whilst this sounds a big responsibility, just when did you last hear of a bank or solicitor being taken to court for their failure to perform? I would suggest never.

Since most estates can be wound up perfectly well by anyone who can add up figures, and will probably take around 100 hours in total of work, I'd like to suggest that at the rate of around £7000 per week we should all shove two fingers up to the bank and do the work ourselves.......

ED

Sandy May - thanks so much for your report – sad though it is. I greatly admire you for being so articulate despite probable tears in your eyes as you wrote. Well done indeed for sorting out Probate with intelligence and tips from the borrowed 'Which' book.

roob_the_doob - you raise some interesting points. I believe taxes including Council Tax should be greatly reduced on the "primary residence", and vastly increased on all additional residences owned by the same person. There should be a disincentive for people to buy-to-rent, or indeed inherit-housing-and-rent. This would naturally adjust property to a truer value across the UK, thereby making starter homes achievable by young adults and people with moderate income.

Inheritance Tax unfortunately is a disincentive for parents to save and bequeath to assist children, grandchildren, etc. Hence a disincentive to teenagers and young adults to get in the savings habit.

nemo183 – thanks for your reminder. Stories about high fees for Solicitors to act as executor unfortunately put many people off the potentially very cheap setting up of a Will via a Solicitor (allocating a couple of trusted relatives or friends to be listed as executors).

33pelter

A. No inheritance tax. Hard earned cash should all be passed on.

It is just a from of double taxation and is absolutely ridiculous.

Fifer

ED wrote:

Hence a disincentive to teenagers and young adults to get in the savings habit.

That doesn't follow. Do you really think teenagers would be more inclined to save if inheritance tax was lower? Do you think many teenagers give any thought to inheritance tax at all?

33pelter

Fifer wrote:

Do you think many teenagers give any thought to inheritance tax at all?

I am a teenager and I am obviously giving it thought as I am debating it on this thread....

ED

While looking after an elderly relative recently, I caught up with newspaper reading...including Labour MP Stephen Byers piece in The Guardian on 1st September. He calls for abolition of Inheritance Tax.

Apparently, Chris Wales, a former adviser to Gordon Brown on tax policy, says IHT has a negligible effect on the redistribution of wealth.

6% of estates pay IHT, a trebling since 1997 when only 2% were liable.

Byers states, "The original architects of inheritance tax never intended it to apply to the people who are now falling within its net. We are seeing people who were never higher-rate tax payers ending up paying tax at 40% on their death."

He adds, "Last year, social democratic Sweden abolished inheritance tax. They did so out of recognition of its fundamental unfairness. The loss of income is financed by other means including through 'green' taxes. They were right, and we should follow their lead."

Air travel should be much more heavily taxed than currently, for starters. Er hum, train travel also needs to work more efficiently and be properly subsidised... What other ideas?

33pelter – good point (above). I know many teenagers and children who have expressed shock that Inheritance tax exists. Many understand warnings that pensions will not be sufficient after retirement to keep a roof independently over the head, let alone food, water, heating, oh and Council Tax paid for. This knowledge is a disincentive to work as well as to a savings habit.

Miss-spent_2

going2die_rich wrote:

C - Double it!


Why do those that are getting the inheritenance 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.

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.

QUOTE]
Do you have children?
Most people who have children develop a strong paternal/maternal link with them that never ends. Everything you do is for your kids, you want them to have better than you and to be secure for the rest of their lives. Why should my money go back into society? I've already paid tax on it and who is to say that my children don't need it. A young persons financial future is very bleak at present
I am afraid I disagree with you, it sounds as if you begrudge someone doing well and having money.
I think ant IHT is immoral, why should anyone be penalised for having money?

marcais

33pelter wrote:

A. No inheritance tax. Hard earned cash should all be passed on.

It is just a from of double taxation and is absolutely ridiculous.

How is it double taxation? Unless you consider all tax to be double taxation. The company I work for pays tax on the money they make. They then pay me and I pay tax on that money. If I want to spend that money I've already paid tax on I get hit with VAT. And the shop I spent the money in pays tax on the money I gave them. Then the employee they pay pays tax on the money the shop gave them, that I gave the shop, that my company paid me.

My parents spent the money they earned to buy a house. When they die I get hit with inheritace tax if the value of the assets they leave behind is above a certain value. That inheritance is effectively income to me, so why should that income be exempt from taxation? I would get taxed on the rest of my income, so why not my inheritance?

I agree in principle with the idea of inheritance tax but am open to what the threshold levels before it should be paid are set to.

Andy_Davies

nemo183 wrote:

It is a sad fact that the Inland Revenue lack the ability to enforce the collection of IHT from wealthy estates because 1) They lack the skills to draft the correct legislation, and 2) The calibre of their staff falls so far below the calibre of those employed to exploit the very loop holes they have left open.

I don't think it's really the IR's fault...

People with money will always have options, yes there are things like trusts etc., but one of the simplest is just move to a country with no inheritance tax. Doesn't matter where your assets are then...