Inheritance Tax

[AuroraSaab]

It stems from a time when £500k was a lot of money. In many parts of London it wouldn't buy you an ex-council flat now. It does seem to catch out people in the middle, who have benefited (partly) from successive governments letting the housing market get out of hand, but who aren't necessarily rich enough or savvy enough to get their wealth tied up in tax free trusts. But if you get rid of it you are just benefitting the better off in-the-middles a bit, and the super rich a lot.

Edit: As Winjim says it's only become an issue that affects a lot of people now because of the state of the housing market. It was a tax on the very rich until more recently.

 

[Beebo]

So they say. I can't see that on the Gov website though. That soundly puts the limit at £500k.

It’s £500k per person, so a married couple has £1m.
My understanding is that you and your wife both get £325k each. So double that to £650k.
Then there is a further £175k per person if the family home is given to dependents.

 

[Beebo]

I don't underdstand the logic behind inheritance tax; please feel free to enlighten me. If my Dad left me a million pound estate when he died, which he worked hard for, and chooses to leave it to me, why do I then owe money on it? In principle it's the previous owners' right, and choice, as to who they give money to surely?

Someone could also win £70m on the lottery and not pay a sausage, but inherit £1m and you have to hand (what %) over to the government?

It’s a capital gains tax on money you haven’t earned. It helps redistribute wealth so makes sense when you think about it.
The lottery winnings is an anomaly.

 

[matticus]

10 points to Gryffindor, well put Winjim and Claud!

 

[Ian H]

But his point is that the capital would be better invested elsewhere rather than in a trust.

Better for whom?

 

[Ian H]

Unregulated inheritance increases inequality.

 

[Beebo]

Better for whom?

You’d have to ask him.
I think he’s talking nonsense.

 

[BoldonLad]

This is nonsense on stilts. The tax is on the transaction. The hatred of inheritance tax amongst the wealthy is just bog standard class asset-hoarding and wagon-circling against economic justice.

For those of us who are worker bees, wasn’t tax paid on the money we earned to pay deposit, monthly mortgage payments etc

 

[Beebo]

For those of us who are worker bees, wasn’t tax paid on the money we earned to pay deposit, monthly mortgage payments etc

The tax on tax argument has been covered off already. We all pay VAT out of taxed income.
And the profit on a house value is totally untaxed if it’s your sole property.

 

[BoldonLad]

True. I was more thinking that if my wife and I were to shuffle off our mortal coils, our daughters would inherit the house that they currently live in. They would then have to immediately sell it as the inheritance tax would be at least £100k. It's not a mansion by any means, but we live in an affluent area where house prices are high, so the property value is therefore quite a bit over that £500k threshold.

That is rather assuming that the house is not mortgaged, or, possibly the subject of an equity release deal?

 

[BoldonLad]

The tax on tax argument has been covered off already. We all pay VAT out of taxed income.
And the profit on a house value is totally untaxed if it’s your sole property.

I think it is if it is your residence, rather than you sole property?

 

[icowden]

That is rather assuming that the house is not mortgaged, or, possibly the subject of an equity release deal?

The house is mortgaged but the life insurance would pay that off.

 

[newfhouse]

For those of us who are worker bees, wasn’t tax paid on the money we earned to pay deposit, monthly mortgage payments etc

Yes, but you didn’t earn the massively increased value of your house (and neither did I). You may have improved and cared for it, but mostly you just lived in it and the bulk of your inflation in value happened without you lifting a finger.

 

[BoldonLad]

The house is mortgaged but the life insurance would pay that off.

Need more insurance to pay the inheritance tax

 

[BoldonLad]

Yes, but you didn’t earn the massively increased value of your house (and neither did I). You may have improved and cared for it, but mostly you just lived in it and the bulk of your inflation in value happened without you lifting a finger.

True. Although, I do live in the impoverished North, so, house value inflation is not such a big deal to me