Inheritance Tax - I’ve learnt to look on the bright side

Madeinireland101

I have always been a frugal person - I’ve always wanted to pass on as much as possible to the kids when I go. I find it difficult to spend money on myself - maybe as a result of growing up in a family without much money and hating waste. 

This new change to include pensions as part of your estate has made me do a lot of thinking and seems to have brought about a bit of a change for the better despite it hitting me quite hard. For example - I now find myself generously paying for all when we go out for family meals and toasting the taxman to thank them for the 40% discount 😀

There is a bright side to this change which I’m beginning to appreciate 😀

Flugelhorn

I give excess income to the offspring and tell them that they can have it now as we go along or pay 40% later

Sarahspangles

[Deleted User] said:

Madeinireland101 said:

For example - I now find myself generously paying for all when we go out for family meals and toasting the taxman to thank them for the 40% discount 😀

I think that kind of thing (taking them to see Abba, Taylor, hiring somewhere in Cornwall, etc) is way better that paying some cash by standing order.

Although if I suggested either band my two would have me committed 

jaypers

I’ve certainly started thinking of ways to start passing more on a lot earlier. Think these changes are terrible…..basically means that up to 67% can be lost if the deceased is over 75. 

New_in_the_fens

I am only in my 50’s, but I am handing over money already. Be it payments into the LISA for home purchase in the future, or being generous with spending. We’ve downsized to free up cash for deposits etc.  

When I get to retirement, I intend to spend it. That’s what I’ve saved throughout my career for. 

But this has always been my plan, it’s nothing to do with changes to IHT. If I’ve already spent it to the benefit of me and my family, there won’t be anything left to tax 😂

bjorn_toby_wilde

I wholeheartedly agree.

I’m giving as much as I can afford to my children now, not to avoid inheritance tax, but because I don’t like seeing them struggle. I know I would rather have had the money when I was young and couldn’t afford holidays or nice things.

As it stands I’ll probably inherit from my parents at a point in my life when I really don’t need it. When that time comes I’ll pass every penny of that inheritance straight to my children.

I always worked on the premise that I would inherit nothing and must make my own way. That way any inheritance would be a bonus.

FIREDreamer

If a couple has £1m or less, including property, then inheritance is a non issue?

If so, start spending and gifting to get below £1m.

Is this correct?

(Marginally over £1m including DC pot here, under £1m excluding it).

cfw1994

Madeinireland101 said:

I have always been a frugal person - I’ve always wanted to pass on as much as possible to the kids when I go. I find it difficult to spend money on myself - maybe as a result of growing up in a family without much money and hating waste. 

This new change to include pensions as part of your estate has made me do a lot of thinking and seems to have brought about a bit of a change for the better despite it hitting me quite hard. For example - I now find myself generously paying for all when we go out for family meals and toasting the taxman to thank them for the 40% discount 😀

There is a bright side to this change which I’m beginning to appreciate 😀

I think you are spot on 👍

We were gently running down ISA funds, avoiding taking more than the tax free payments from my DC pension: now we have a bit more flexibility on what we do 🤷‍♂️
We won’t make any major changes until we get through the spring budget next year to see what tinkering happens.

We do have an anniversary weekend in London coming up, & will enjoy a fancy (£££🤪) tasting meal with our offspring & their partners.  Pre budget they were offering to buy the drinks: post-budget - nah, we will pick up the bill 🤣

Keep_pedalling

FIREDreamer said:

If a couple has £1m or less, including property, then inheritance is a non issue?

If so, start spending and gifting to get below £1m.

Is this correct?

(Marginally over £1m including DC pot here, under £1m excluding it).

The problem comes when your main assets is your home which makes getting below £1M and maintaining enough liquid assets for your own needs is tricky.

We have made substantial gifts to our children over the last 10 years but we are still well into IHT territory and will probably stay that way because we want the ability to fund high quality care if we need it including the option for live in careers which need a considerable amount of savings ring-fenced to handle the worse case of us both needing long term care.

I don’t personally object to my estate having to pay IHT as this is unearned wealth for our children and grandchildren. We have already enabled them on to a couple of steps on the housing ladder and enabled both our daughter and DIL to be stay at home mothers for the last 6-7 years, and if we both get knocked over by a bud this afternoon they would be getting somewhere in the region of £1.3M with HMRC getting £200k which is not exactly a big tax burden.

Should the worse happen and we both need long term care then 40% of the costs will be coming out of HMRC’s slice of the pie. 

Albermarle

jaypers said:

I’ve certainly started thinking of ways to start passing more on a lot earlier. Think these changes are terrible…..basically means that up to 67% can be lost if the deceased is over 75. 

Be aware that between now and the implementation date of April 2027, some of the details of the proposed change may differ from now.
Having said that the overriding premise will remain that pension pots ( bolstered with tax relief), are primarily for income in retirement and not for passing on money tax free to heirs.

NedS

I generally try to view having to paying tax as a good thing - it means I have income or assets, and I'd rather have that income or those assets than not have them.

Keep_pedalling said:

FIREDreamer said:

If a couple has £1m or less, including property, then inheritance is a non issue?

If so, start spending and gifting to get below £1m.

Is this correct?

(Marginally over £1m including DC pot here, under £1m excluding it).

The problem comes when your main assets is your home which makes getting below £1M and maintaining enough liquid assets for your own needs is tricky.

If you are intent in reducing your IHT liabilities, a solution would be to financially downsize to a cheaper property/area which frees up more of the IHT allowance for liquid assets. I speak as someone who lives in an area where houses are cheaper, and our home is no longer our main asset as our SIPPs are now worth more.