Inheritance tax

artyboy

https://forums.moneysavingexpert.com/discussion/comment/82155463#Comment_82155463

I'm sure someone will link the very generous US IHT threshold to their lack of free healthcare, employment rights etc. And to an extent that's fair, things that most countries would consider as basic provision for a civilised society do have to be funded. But as you mention, fiscal drag from allowance freezes, as well as house price growth, is definitely making IHT relevant to more estates.

There will come a point where it's no longer an easy "tax the rich" source of revenue.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82155501#Comment_82155501

Due to the freeze in thresholds etc. and the inclusion of unused pension pots, the the figure is expected to increase to 8% in the not too distant future, and 10% after that.

Of course some estates will only pay a small amount of IHT, so the % of estates getting 'hit hard' will be less than these percentages.

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/82155505#Comment_82155505

Yes healthcare finances in the US are a joke, but the generous IHT rules aren't really an excuse, mostly because IHT is such a small fraction of tax revenues in both the US and the UK. Before retirement people get health insurance through their work or means tested government programs. Most retired people use the government financed Medicare system which is funded by a 3% payroll tax and then pay a means tested monthly premium that starts at $200 and they generally buy more insurance to cover Medicare gaps that might cost $100/month. So plenty of money goes into US healthcare, but it's just ridiculously expensive in the USA.

The general levels of income taxation in the US aren't that different from the UK as you get taxed at the Federal and the State level and the equivalents of council taxes can be higher than in the UK

FYI there is a big $15M IHT allowance in the US at the Federal level, but quite a few states have estate tax and or IHT at lower thresholds though they are still more generous than in the UK.

QrizB

I note we're a good way into page 6 of this thread and the OP has yet to return.

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/82155527#Comment_82155527

Back to the OP's point. For married people with a house and kids I think the effective allowance of 1M will exclude the vast majority of estates from IHT and feels sensible. But the single person with no children is stuck at 325K which seems low and unfair to me. Something also needs to be done about unfreezing the allowances to account for inflation.

John464

Jeremy Clarkson explained he put his money into agricultural land to avoid inheritance tax.

The tax system encourages us to put the big money into existing assets instead of creating new assets, so its hardly surprising we have no real growth.

But tax rates can change. Reeves and Starmer proposed to raise inheritance tax on agricultural land, but backed down under the onslaught from powerful vested interests.

dcs34

https://forums.moneysavingexpert.com/discussion/comment/82156831#Comment_82156831

"Backed down under the onslaught from powerful vested interests" is an odd way to say their policy failed to stand up to scrutiny, when it was rightly pointed out to them that family farms might be asset-rich on paper (to fall into the inheritance tax regimes), but are usually very cash-poor to be able to pay such tax. Especially as (given it's inheritance tax we're talking about) they will likely have just lost the main earner and struggling as a result. In an increasingly uncertain world it is blitheringly stupid to go after the people who grow (some of) the food we eat in this country. We should be encouraging more people to get into farming, not making it harder.

If the target was the institutional investment firms and millionaires buying up agricultural land as "an asset" to reduce their inheritance tax bill, surely someone at the treasury could have come up with a more precise and targeted policy to such effect. Like whether they are actually using the land for productive agricultural purposes ("what crops have you planted?", "what machinery have you purchased?", etc.).

If HMRC can recruit hundreds of snoopers to go round the country knocking on any door worth more than £1.5m, surely they could do the same to go look at the land Blackrock et al. are hoovering up.

izawa

IHT is bad, you are punishing hard working people. IHT should be banned or at the very least make it to charge just 5%

John464

https://forums.moneysavingexpert.com/discussion/comment/82157139#Comment_82157139

Run that oned by me again please. When the Aristocracy inherit £billions of agricultural land tax free how it that earned income?

John464

https://forums.moneysavingexpert.com/discussion/comment/82156884#Comment_82156884

Obvious solution is to sell some of the land to pay the tax. Whoever buys it is bringing new people into farming. Especially as it will bring down the price of agricultural land if its no longer bought as an inheritance tax dodge. (making English agricultural land cost about 4 times as much as it does across the channel) Even more puzzling is the suggestion that if inheritance tax is charged on unearned land the same as other assets the land will no longer be farmed?