People are saying it's unfair to have inheritance tax as the money is taxed multiple times, as if money doesn't get taxed again and again? If you get paid by your employer, you pay income tax, NI etc, you then spend that money in a shop and pay VAT. The shop pays its employees who pay income tax NI etc. And the cycle repeats. We often have taxes when there are transfers of money between people, I don't understand why people think inheritance tax is different in this regard? Think of it as an income tax for those receiving the money if you like instead. And yes - there is a moral argument that people should be able to dispense of the wealth they have accumulated as they see fit (their labour, their sacrifice, their money), but at the same time would that mean they shouldn't have to pay VAT on it if they buy luxury items? From another moral perspective, is the person receiving the income doing anything for it, or are they just getting something for nothing.
My understanding is that in Italy, there is no Nil Rate Band, so on death (possibly first and second death) all wealth is taxed, (there is no £325,000 /£500,000 / £1 million tax free threshold); but it is taxed only at 3% if the transfer is made to a spouse or to children/grandchildren. If this were to be adopted in the UK, does the IFS calculate that it would raise more or less than Inheritance tax in its current form? Assuming all other exemptions eg AIM shares and agricultural land etc were abolished).
Simple answer is to abolish IHT, and treat inheritance as income to the recipient. Logical, and encourages the source to divide up the estate to reduce total tax paid. Which increases re-distribution, one of the purposes of the tax.
Not logical at all, you can’t treat property, financial and real assets as though they are income because they never were, same reason why there’s CGT and income tax when you live…
@@jimbojimbo6873 it is, by definition, unearned income. Which used to attract an extra 20% income tax in the past. And there are some countries that do tax inheritance as income. It is a choice the chancellor could make.
Saying relatively few estates pay it misrepresents it's scale, as it ignores the many estates that have ALREADY jumped through hoops to avoid it. Let's not forget that as wealth has been built up the government has applied all it's tax rules (progressive and otherwise) to take a fair slice. If that's the problem, reform tax law on earnings, CGT, unearned income etc. What remains is YOUR slice, and if you have accumulated a lot, that's simply because you haven't spent it. You should be able to give it to whoever you so wish without the government wanting yet another bite of the cherry. You've kept hold of it, often to give to your children in later life, or to fund care in your later years. If, for example, rising property values have swollen an estate, they've also swollen the mortgage costs of the homes inhabited by the deceased beneficiaries. These large estates do get split again and again, and the money does, ultimately, all get spent and therefore taxed.
Id be more receptive to your argument if you also accepted that primary residence and primary pensions needs to be included in any calculation. They are the primary source of wealth in most estates and have effectively had no tax paid on them
@@hughiemg2 The primary source of wealth is people making money then not spending it. That's the starting point for accumulating wealth. The primary residence will have been paid for via a mortgage, using money the owners earned over say 25-30 years of working, and paid taxes on at source. If you mean the additional value added to the primary residence through rising prices, that's not the homeowner's fault, it's the whole country's. It only reflects the housing-specific-inflation rate, and if indexed, that gain is zero. My grandad paid £5k for his home and now it's worth £350k, but he's not "made" anything really, because if he sold up, it would cost him £350k to get a replacement.
Force sale of real assets into uncertain liquidity market because someone died, and the state wants your fiat based upon questionable estimates of "market value" where the seller may be forced rather than choosing this exchange. Doesn't an inheritance tax literally incentivize the government to want people to die? Do you wait until people die to start addressing monetary and real inequality? Is this what you'd prefer? Or would you prefer a more proactive entity that isn't just waiting until people start dying?
Highest rate for children in Netherlands is 20% lower for smaller and a zero rate for very small amount. But gift tax with a zero rate for amount per year
Trusts were mentioned briefly but are a massive vehicles for the rich to avoid IHT. IHT is a tax charged on valued transferred by a chargeable transfer. It can be during lifetime ie gifts into trusts or on death. It’s a misnomer that it’s just a death tax.
Bear in mind just how much house prices have risen. Pretty difficult to have a house in this city at that price. Average house prices here £352k. So every penny in the bank liable for that tax, unless you can add on that additional tax free nil rate band. If you,re divorced, have worked, scrimped and saved you are hardly rich. It,s just the house you live in has increased so much in value and you get stung, never mind that frugal life, & having never asked for a penny. I call it grossly unfair for singletons. With so many more divorcees, even more hit unfairly.
Inheritance tax is double dipping. Tax has been paid on income throughout someone’s life. Why should they pay again? Then you have to ask, what have they received from the tax they have paid?
Most wealth in estates comes from private pensions and primary residential property which has no tax paid on it. It's not double dipping on those assets.
It discriminates against a single person , with no children, no grandchildren. Maybe no nieces or nephews also. We had to pay £75,000 Inheritance tax! 40 percent! When our Single uncle passed on! It should be abolished. Or very low, like many nations!!!
You didn't pay any IHT at all. Your uncle's estate paid it. You inherited what was left over. Saying that you paid IHT is the same as saying that you paid CGT and income tax on his investments over the years - It wasn't your money when it was taxed.
That's true today, but that figure is only going to increase each year. By the 2032-33 tax year, HMRC will expect to raise close to £15bn. For that reason, it is unlikely any Labour government would abolish it, especially with the so-called current 'black hole' in the public finances. Moreover, it's likely that the residence NRB will be abolished and even IHT rates themselves may be increased in the upcoming budget. Soon, Starmer will be able to pay for his own glasses, suits and private boxes at Arsenal....
@@SmileyEmoji42 Not just the poor. I would see it as giving money to the rich too (unless that “tinkering elsewhere” is incredibly skewed towards wealth), and I’m not poor. How is it not giving money to the rich?
The reason IHT is considered so unfair is that: 1. The very rich effectively pay proportionately much less IHT than everyone else. 2. The deceased's accumulated assets are created from income or capital that's already been taxed (IC, NI, CGT potentially a number of times over) 3. It's NOT an unmeritocratic tax - think of the thousands of adult children who have lived with/moved back to their parents for decades as carers and inherited the family home when their parents die. These people have sacrificed careers of their own, money and property and, significantly, any chance to have relationships and families of their own. Often, they have to build a new life in middle age with nothing but an inheritance. 4. Is it unfair that a child of better off parents receives an inheritance whereas one from less well-off parents doesn't??? Who worked harder/smarter to create the assets?? If it is unfair, then we may as well just pay brain surgeons the same as a shelf stacker. Communism at work. 5. The state has done nothing to deserve a second bite of the cherry!
A question the claim of communism? But I do see IHT as an important tool while itsnt perfect that needs reform does help fight inerqaulity and raise tax to help poorer people.
@@jamesholt4449 Thanks for commenting. I was being a little facetious regarding the Communism claim. However, the fundamental unfairness of taxing again that which has been accumulated through the investment of post-tax (already taxed) income or capital is undeniable. It also disincentivises wealth creation in the first place if the burden falls heavily on those in the middle. IHT doesn't really help with wealth redistribution - inequality has grown massively whilst receipts from IHT also increase. IHT should only apply to the wealthiest estates, those with assets of over £2M (but excluding the family home and at a tiered rate). Business transfers to family should be at a lower rate than present up to a certain threshold and at a higher rate than present for those over £2M. It's bonkers to think that a business has to be sold or saddled with debt in order to pay an IHT bill.
@@jamesdaw131 CGT is payable on crystallising a gain upon disposal of an asset. If you die, you never actually realised a gain on the asset yourself. That's why you/your estate don't pay CGT on death. You're not avoiding anything because the liability never arose in the first place. Also, paying CGT upon death is exactly what the new government is potentially going to do: levy both inheritance tax and CGT simultaneously. Let's see what happens on 30th October. They want to change what the meaning of a gain, when and who it applies to, thereby making the tax applicable in much wider circumstances. Truly Kafkaesque...
@@Saj-cz8ioyeah but the original price is reset on the transfer of ownership on death. That isn’t fair is it. And we don’t actually know what Mrs reeves will do yet. Let’s worry about that when we do!
So far I haven't heard a word about the fact IHT is a double tax, you've been taxed on everything up until the end, so for that to then be taxed is very unfair.
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People are saying it's unfair to have inheritance tax as the money is taxed multiple times, as if money doesn't get taxed again and again?
If you get paid by your employer, you pay income tax, NI etc, you then spend that money in a shop and pay VAT. The shop pays its employees who pay income tax NI etc. And the cycle repeats. We often have taxes when there are transfers of money between people, I don't understand why people think inheritance tax is different in this regard?
Think of it as an income tax for those receiving the money if you like instead.
And yes - there is a moral argument that people should be able to dispense of the wealth they have accumulated as they see fit (their labour, their sacrifice, their money), but at the same time would that mean they shouldn't have to pay VAT on it if they buy luxury items? From another moral perspective, is the person receiving the income doing anything for it, or are they just getting something for nothing.
Maybe it should be a flat rate of 20% for all estates?
Please do do that session on social mobility and housing and bank of mum and dad, its incredibly important
My understanding is that in Italy, there is no Nil Rate Band, so on death (possibly first and second death) all wealth is taxed, (there is no £325,000 /£500,000 / £1 million tax free threshold); but it is taxed only at 3% if the transfer is made to a spouse or to children/grandchildren.
If this were to be adopted in the UK, does the IFS calculate that it would raise more or less than Inheritance tax in its current form? Assuming all other exemptions eg AIM shares and agricultural land etc were abolished).
Simple answer is to abolish IHT, and treat inheritance as income to the recipient. Logical, and encourages the source to divide up the estate to reduce total tax paid. Which increases re-distribution, one of the purposes of the tax.
Not logical at all, you can’t treat property, financial and real assets as though they are income because they never were, same reason why there’s CGT and income tax when you live…
@@jimbojimbo6873 it is, by definition, unearned income. Which used to attract an extra 20% income tax in the past. And there are some countries that do tax inheritance as income. It is a choice the chancellor could make.
I don't understand why IHT is so unpopular - It's the only tax that makes nobody worse off than they were before the person died.
It is unpopular with the people that might be recipients. Money they didn't earn and has never been theirs.
Because people want to leave their hard earned income and assets to their offspring, not just hand it back like it was only rented their whole lives
@@jimbojimbo6873 Their hard earned income was only earned because they live in a society that would not exist without taxes.
Saying relatively few estates pay it misrepresents it's scale, as it ignores the many estates that have ALREADY jumped through hoops to avoid it. Let's not forget that as wealth has been built up the government has applied all it's tax rules (progressive and otherwise) to take a fair slice. If that's the problem, reform tax law on earnings, CGT, unearned income etc.
What remains is YOUR slice, and if you have accumulated a lot, that's simply because you haven't spent it. You should be able to give it to whoever you so wish without the government wanting yet another bite of the cherry. You've kept hold of it, often to give to your children in later life, or to fund care in your later years. If, for example, rising property values have swollen an estate, they've also swollen the mortgage costs of the homes inhabited by the deceased beneficiaries. These large estates do get split again and again, and the money does, ultimately, all get spent and therefore taxed.
Id be more receptive to your argument if you also accepted that primary residence and primary pensions needs to be included in any calculation. They are the primary source of wealth in most estates and have effectively had no tax paid on them
@@hughiemg2 The primary source of wealth is people making money then not spending it. That's the starting point for accumulating wealth. The primary residence will have been paid for via a mortgage, using money the owners earned over say 25-30 years of working, and paid taxes on at source. If you mean the additional value added to the primary residence through rising prices, that's not the homeowner's fault, it's the whole country's. It only reflects the housing-specific-inflation rate, and if indexed, that gain is zero. My grandad paid £5k for his home and now it's worth £350k, but he's not "made" anything really, because if he sold up, it would cost him £350k to get a replacement.
Force sale of real assets into uncertain liquidity market because someone died, and the state wants your fiat based upon questionable estimates of "market value" where the seller may be forced rather than choosing this exchange.
Doesn't an inheritance tax literally incentivize the government to want people to die?
Do you wait until people die to start addressing monetary and real inequality? Is this what you'd prefer? Or would you prefer a more proactive entity that isn't just waiting until people start dying?
Highest rate for children in Netherlands is 20% lower for smaller and a zero rate for very small amount. But gift tax with a zero rate for amount per year
Trusts were mentioned briefly but are a massive vehicles for the rich to avoid IHT.
IHT is a tax charged on valued transferred by a chargeable transfer. It can be during lifetime ie gifts into trusts or on death. It’s a misnomer that it’s just a death tax.
Agreed. Id drop the rate and then abolish all the loopholes including trusts.
If we have IHT, why aren’t gifts taxed?
it is often a tax on the same money over and over again which is very unfair once every 100 years at say 10% over 1m would be much fairer.
If you don't then wealth inequality will grow even faster and most people think that wealth inequality is even more unfair
LOL, tax for the rich, inheritance tax STARTS at £325k, cry me a river!
Bear in mind just how much house prices have risen. Pretty difficult to have a house in this city at that price. Average house prices here £352k. So every penny in the bank liable for that tax, unless you can add on that additional tax free nil rate band. If you,re divorced, have worked, scrimped and saved you are hardly rich. It,s just the house you live in has increased so much in value and you get stung, never mind that frugal life, & having never asked for a penny. I call it grossly unfair for singletons. With so many more divorcees, even more hit unfairly.
Pg Wodehouse?
First thing we can do is make the Grosvenor estate heirs pay what they should have.
Inheritance tax is double dipping. Tax has been paid on income throughout someone’s life. Why should they pay again? Then you have to ask, what have they received from the tax they have paid?
Most wealth in estates comes from private pensions and primary residential property which has no tax paid on it. It's not double dipping on those assets.
It discriminates against a single person , with no children, no grandchildren. Maybe no nieces or nephews also. We had to pay £75,000
Inheritance tax! 40 percent! When our
Single uncle passed on! It should be abolished. Or very low, like many nations!!!
You didn't pay any IHT at all. Your uncle's estate paid it. You inherited what was left over. Saying that you paid IHT is the same as saying that you paid CGT and income tax on his investments over the years - It wasn't your money when it was taxed.
Irs simple.. rich people make the laws... and why would they reform laws which cost them more in tax.
It only raises £7 billion. It could easily be abolished with some tinkering elsewhere.
That's true today, but that figure is only going to increase each year. By the 2032-33 tax year, HMRC will expect to raise close to £15bn. For that reason, it is unlikely any Labour government would abolish it, especially with the so-called current 'black hole' in the public finances.
Moreover, it's likely that the residence NRB will be abolished and even IHT rates themselves may be increased in the upcoming budget. Soon, Starmer will be able to pay for his own glasses, suits and private boxes at Arsenal....
The poor would see it as giving money to the rich. A political impossibility for a Labour government
@@SmileyEmoji42 Not just the poor. I would see it as giving money to the rich too (unless that “tinkering elsewhere” is incredibly skewed towards wealth), and I’m not poor. How is it not giving money to the rich?
The reason IHT is considered so unfair is that: 1. The very rich effectively pay proportionately much less IHT than everyone else. 2. The deceased's accumulated assets are created from income or capital that's already been taxed (IC, NI, CGT potentially a number of times over) 3. It's NOT an unmeritocratic tax - think of the thousands of adult children who have lived with/moved back to their parents for decades as carers and inherited the family home when their parents die. These people have sacrificed careers of their own, money and property and, significantly, any chance to have relationships and families of their own. Often, they have to build a new life in middle age with nothing but an inheritance. 4. Is it unfair that a child of better off parents receives an inheritance whereas one from less well-off parents doesn't??? Who worked harder/smarter to create the assets?? If it is unfair, then we may as well just pay brain surgeons the same as a shelf stacker. Communism at work.
5. The state has done nothing to deserve a second bite of the cherry!
A question the claim of communism? But I do see IHT as an important tool while itsnt perfect that needs reform does help fight inerqaulity and raise tax to help poorer people.
@@jamesholt4449 Thanks for commenting. I was being a little facetious regarding the Communism claim. However, the fundamental unfairness of taxing again that which has been accumulated through the investment of post-tax (already taxed) income or capital is undeniable. It also disincentivises wealth creation in the first place if the burden falls heavily on those in the middle. IHT doesn't really help with wealth redistribution - inequality has grown massively whilst receipts from IHT also increase. IHT should only apply to the wealthiest estates, those with assets of over £2M (but excluding the family home and at a tiered rate). Business transfers to family should be at a lower rate than present up to a certain threshold and at a higher rate than present for those over £2M. It's bonkers to think that a business has to be sold or saddled with debt in order to pay an IHT bill.
Don’t forget you don’t pay CGT on death - so you are avoiding that one
@@jamesdaw131 CGT is payable on crystallising a gain upon disposal of an asset. If you die, you never actually realised a gain on the asset yourself. That's why you/your estate don't pay CGT on death. You're not avoiding anything because the liability never arose in the first place.
Also, paying CGT upon death is exactly what the new government is potentially going to do: levy both inheritance tax and CGT simultaneously. Let's see what happens on 30th October. They want to change what the meaning of a gain, when and who it applies to, thereby making the tax applicable in much wider circumstances. Truly Kafkaesque...
@@Saj-cz8ioyeah but the original price is reset on the transfer of ownership on death. That isn’t fair is it.
And we don’t actually know what Mrs reeves will do yet. Let’s worry about that when we do!
You assume people would not spend the money and would become inheritance tax, so perhaps there will just be losers
So far I haven't heard a word about the fact IHT is a double tax, you've been taxed on everything up until the end, so for that to then be taxed is very unfair.
Reduce the rate to 30% on the first £1 million and raise the allowance to £500,000.
Simples.
So, because you have had 40 consecutive years of Tory rule, society is extremely unequal? A lot of these videos conclude 'Tories ', don't they?
Rich people setting the tax rules to benefit rich people. No shock there.
Tories again?