IHT -Tories help their own?

CLAPTON

redux wrote: »

Not necessarily.

Only the amount over the tax free threshold is taxed.

Then I believe an arrangement may be made to pay the tax spread over 10 years, with current interest rate about 3%.

Or you might take out a mortgage if that has a slightly better repayments.

Depending upon the family circumstances etc but taking a modest London home worth 1 million
IHT would be 40% of 1,000,000-325,000 =675,000 x 40% =270,000


so only £22,700 (net after income tax) per year for 10 years (ignoring interest)

redux

westernpromise wrote: »

3% of estates pay it but many more are exposed to it.

You can't avoid IHT where the majority of the estate is the house unless you're prepared to sell the house before you die. Thus means it captures people whose estates' main asset is a house that's gone up in value, but not the really huge estates where various Labour grandee fiddles are possible.

Incidentally, IHT is of course just a tax on house price inflation. What does the panel think will happen to house price inflation if the state has a vested interest in house prices going up?

If the house is sold and some of its value passed on, then that amount becomes a potentially exempt transfer for inheritance tax purposes. That becomes free of tax if the person survives another 7 years.

Another drawback of all this is in case the person eventually needs to go into a care home. They might have kept all their assets to help cover the cost, or they may have passed most of it on so a means test would put this cost on to the local council. Councils get fairly strict about people intentionally depriving themselves of their assets like this and try to recover money back.

You're right that it can be effectively a tax on house price increases.

In the past the threshold was increased most years for just such reasons, but it's been frozen for 6 years now.

An increase to £375k or £400k would probably make up for those years, but Osborne seems to want to add a bit on top. Mind you he was saying about the same numbers 7 or 8 years ago.

redux

CLAPTON wrote: »

Depending upon the family circumstances etc but taking a modest London home worth 1 million
IHT would be 40% of 1,000,000-325,000 =675,000 x 40% =270,000


so only £22,700 (net after income tax) per year for 10 years (ignoring interest)

If it has been owned by a couple, the allowance for the first deceased is transferable to the second if most of the assets are heading that way too.

Then your example would see £140,000 due on £350,000.

Edit: this is the conventional line of thinking at the moment, but I don't actually know whether this automatically happens if each leaves everything to the other, or whether certain will conditions are also involved, tenants in common and all that stuff (which I don't understand)

michaels

Some people feel that assets are purchased out of taxed income so taxing them again when they are passed between generations is by definition double taxation and thus unfair. Against that of course is that inheritance tax is very efficient to collect and causes less economic adjustment than other taxes, plus of course allowing wealth to pass between generations by definiton mitigates against social mobility.

My personal feeling on this is that the problem is the ppr exemption on CGT. Sure it is not fair to tax inflation but any gains above RPI should be taxed on the grounds that building land is restricted and so gains resulting from this limit in supply should accrue to the country as a whole rather than to the individual who owns the land.

(The tax could be deferred until death so that it did not make it impossible to move house during periods of house price inflation)

purch

Am I correct in thinking that a few years ago (decade maybe) they changed the rules so that if one partner died, the surviving spouse could use both of the IHT exempt amounts when the estate was passed on ??

I could have just dreamt it after one or two large one's :eek:

redux

purch wrote: »

Am I correct in thinking that a few years ago (decade maybe) they changed the rules so that if one partner died, the surviving spouse could use both of the IHT exempt amounts when the estate was passed on ??

I could have just dreamt it after one or two large one's :eek:

I think that's correct, though as I edited and added to my post above, I'm not quite sure if that is fully automatic nowadays or still depends on the wills being written in a certain way.

But that's the basis of the assumed numbers being mentioned, £325k per person and Osborne wants to add £175k each, thus £1 million overall.

I think some long-term couples might be getting married when they look at this.

Effectively that arrangement means that whereas beforehand each parent might leave everything down to the kids, doing it this way means it can intermediately go to the surviving spouse without tax penalty later.

But for families likely to have larger amounts to consider, there are ways to mitigate it in advance, involving potentially exempt transfers and trusts and so on.

chewmylegoff

purch wrote: »

Am I correct in thinking that a few years ago (decade maybe) they changed the rules so that if one partner died, the surviving spouse could use both of the IHT exempt amounts when the estate was passed on ??

I could have just dreamt it after one or two large one's :eek:

Yes that's right if you're married or in a civil partnership - effectively the nil rate band is already £750k in such circumstances.

Personally I would just scrap IHT altogether and introduce a gift tax of 100% chargeable on any gift (including a fiver slipped into a card by nana - even the cost of the card would attract a tax charge if I had anything to do with it).

Graham_Devon

chewmylegoff wrote: »

Tories in "Tories announce policy designed to appeal to their core voters shocker".

What next? Labour promising to repeal the hated "bedroom tax" (which is only hated by their core voters).

The idea that it is somehow wrong for a political party having policies designed to benefit the people who support their party, which seems to be the thrust of the thread title, is bizarre. I assume the OP will be picking through the Labour and Lib Dem manifestos to flag up other disgraceful examples of this.

Maybe. But the tories keep making a big statement that we are all in it together.

So sure, if they want to target their core voter with tax cuts, that's fine.

But suggesting at the same time that were all in it together?

You can't have it both ways and not expect criticism.

BobQ

Interesting comments on IHT, but my OP was about the impact on the housing market.

This will only increase the bias we have towards putting your money in a house, to inflating potentially the value of housing, without dealing with the lack of housing, which is driving up the value of private residences.”

Surely there are wider implications of this change that will impact on housing availability and prices. I think it is very contemptuous of hard working people aspiring to buy a house in areas of already high house prices. Will it not drive up house prices at the lower levels? It seems quite divisive between those who own and those who rent.

CLAPTON

BobQ wrote: »

Interesting comments on IHT, but my OP was about the impact on the housing market.



Surely there are wider implications of this change that will impact on housing availability and prices. I think it is very contemptuous of hard working people aspiring to buy a house in areas of already high house prices. Will it not drive up house prices at the lower levels? It seems quite divisive between those who own and those who rent.

solution to high house prices is to build more