Inheritance Tax

[africanspur]

That in no way logically follows. The logic is that tax should be fair. Inheritance tax isn't fair because the fair parts of it are covered by CGT, which why it has been abolished in so many countries like Australia and Canada.

And I only ever see the right arguing against abolishing it despite it seemingly be a more lefty thing. Possibly as a red herring to help them pretend they care about fairness. Maybe.

It absolutely does. Your entire argument is that there's no point paying it because the really really rich dont pay it either. They also find workarounds around CGT and other forms of tax too. So then what's the point of any tax? Bloody queen isn't paying NI or CGT, that's for sure.

Yet most of the left wing posters on this thread, including myself, including some who will either be paying it themselves or who's kids will be paying it, are for it? And it was a liberal PM in Australia that abolished it isn't it? When did they become left wing?

 

[TwoSheds]

If you're talking about that specific instance, then that was not included in the 2020-21 numbers for obvious reasons. For ultra rich generally, they have approximately zero impact on the fact that less than 4 % of deaths result in inheritance tax, or that an even much lower amount of deaths leave behind homes worth more than 1.5m.

Well obviously I'm not talking about that specific instance. It's something that happens plenty. Point is the Duke of Westminster had many multiples of £1.5m properties (he owns half of west London) and he didn't pay tax on basically any of them. So quite clearly there are more than 4% who should be paying tax and it's only the poor ones who actually have to pay any notable amount. That's not to say they shouldn't pay it, just that perhaps there's a more fair way to implement it.

 

[NotThatSoph]

Well obviously I'm not talking about that specific instance. It's something that happens plenty. Point is the Duke of Westminster had many multiples of £1.5m properties (he owns half of west London) and he didn't pay tax on basically any of them. So quite clearly there are more than 4% who should be paying tax and it's only the poor ones who actually have to pay any notable amount. That's not to say they shouldn't pay it, just that perhaps there's a more fair way to implement it.

Ok, but the people with 1.5 million homes are the top 1 %, they are not poor. For the typical £1.5m estate, less than half is property. The rest is in cash, securities and other assets. It's extremely unusual for someone to sit on a £1.5m house, without other assets worth £200k.

The fact that the UK have lax rules around trusts doesn't make millionares middle England. They are very wealthy people, who are still less wealthy than some.

 

[arnie_ni]

Approximately 290k.

Around £300k. £500k for London.

You obviously have access to a website that has this info or something, do you know how many estates are actually above the IHT thresholds? Couldn't be that many overall

 

[arnie_ni]

It is very far from normal for old people to own a mortgage free home worth £1.5m. In the year 2020-2021, 3.73 % of the deaths resulted in inheritence tax, and a substantial portion of those were worth less.

Answered my question. Thanks. Where do you get these stats

 

[arnie_ni]

I’d like to point out that the threshold in Ireland is €335k, with 33% tax payable on any inheritance above that. You Brits have it easy!

Your cgt is higher than here as well

 

[TwoSheds]

Ok, but the people with 1.5 million homes are the top 1 %, they are not poor. For the typical £1.5m estate, less than half is property. The rest is in cash, securities and other assets. It's extremely unusual for someone to sit on a £1.5m house, without other assets worth £200k.

The fact that the UK have lax rules around trusts doesn't make millionares middle England. They are very wealthy people, who are still less wealthy than some.

£200k of assets doesn't put you even close to the 1%. Maybe it puts you in the top 10-20%?

 

[Pogue Mahone]

Your cgt is higher than here as well

And our income tax. And every other fecking tax. With some taxes that don’t even exist in the UK. And we’ve had government perceived as very right wing for much longer than the UK. Go figure.

 

[NotThatSoph]

Answered my question. Thanks. Where do you get these stats

This fact sheet is pretty ok: https://www.gov.uk/government/stati...mentary/inheritance-tax-statistics-commentary

£200k of assets doesn't put you even close to the 1%. Maybe it puts you in the top 10-20%?

200k was the average amount of tax paid, which means a 1.5m estate if two parents and a home is involved. You then brought up house prices, and how it could be someone who bought a home a long time ago and ended up with a very expensive house and not much else, and how that could be difficult for those left behind if they have to take up a 200k mortgage to pay the tax.

I'm saying that very few people own 1.5m homes, and out of this already very select group it will be very unusual to not own other assets that could cover the tax. In a typical 1.5m estate, more than half will be in other assets than residential buildings.

 

[Pogue Mahone]

200k in liquid assets available to pay off tax sounds wildly optimistic tbh. Especially with people living so long and the high chance that one or more elderly parent will need (very expensive) residential care towards the end of their life.

There’s going to be huge regional variation here anyway. A £1m property could end up being owned by a family of relatively modest means in some parts of some cities. Whereas a property with that valuation might only be owned by extremely wealthy people in an area with lower property prices. So it’s the one size fits all approach that creates this sense of unfairness.

 

[TwoSheds]

This fact sheet is pretty ok: https://www.gov.uk/government/stati...mentary/inheritance-tax-statistics-commentary



200k was the average amount of tax paid, which means a 1.5m estate if two parents and a home is involved. You then brought up house prices, and how it could be someone who bought a home a long time ago and ended up with a very expensive house and not much else, and how that could be difficult for those left behind if they have to take up a 200k mortgage to pay the tax.

I'm saying that very few people own 1.5m homes, and out of this already very select group it will be very unusual to not own other assets that could cover the tax. In a typical 1.5m estate, more than half will be in other assets than residential buildings.

There's so many of them in London. Maybe they're all owned by the mega wealthy but who knows.

 

[Pogue Mahone]

An unintended consequence of IT is the way it accelerates gentrification. I’ve lived in two different cities in areas that used to have predominantly middle/working class residents, over multiple generations, but the combination of a increase in property prices with inheritance tax means that more and more people can’t afford to inherit the family home. As soon as the oldest members of the family die, their kids are forced to sell up and move to a poorer neighbourhood, displaced by the very wealthy.

 

[Pogue Mahone]

Oh and one more thing. How many people that we consider “rich” would only own one property? I’m all in favour of taxing the hell out of second and subsequent properties. It’s screwing money out of a recently bereaved family who only own one property between them that seems very harsh.

Additional property wealth was worth £941bn in 2014-16, the latest data available. 5.5 million adults, or 11.2 per cent of the population, owned multiple properties

Link

 

[rimaldo]

Oh and one more thing. How many people that we consider “rich” would only own one property? I’m all in favour of taxing the hell out of second and subsequent properties. It’s screwing money out of a recently bereaved family who only own one property between them that seems very harsh.

yep. makes sense to have one home completely excluded, alongside anything ring fenced in a pension, then tax the hell out of anything else. makes estate planning a lot easier and forces people to keep money in a pension for later life and makes it less attractive to own multiple homes. which goes a long way to solve a lot of the problems current generations are facing. the people hit by it will be those exceeding the limits of both. those are the ones that can afford to be taxed the most. of course, it won’t happen as the middle needs a cocking from both ends. who’s going to pay for everything otherwise?

 

[The Corinthian]

And our income tax. And every other fecking tax. With some taxes that don’t even exist in the UK. And we’ve had government perceived as very right wing for much longer than the UK. Go figure.

I just looked into Ireland taxes - some are higher, some are lower, but by in large they're pretty similar.

Income is taxed at 20% up to €40,000, and 40% for €40,000 and above. With that you get around €3,500 in a tax free amount which is uncapped based on how much you earn (in the UK your personal allowance is capped when you start earning over £100k). Certainly, for individuals who earn over £100k, the Irish tax system is a lot more appealing when comparing it to the UK (where the marginal tax rate is around 62% up to £125,000). Even in this example, where you're earning £30k/€35k, your take home pay is greater in Ireland:

	Ireland	UK	Diff in UK
Gross Income	35,059.47 EUR / 30,000.00 GBP	30,000.00 GBP / 30,000.00 GBP	- 0.00 GBP
Tax Due	6,202.48 EUR / 5,307.39 GBP	6,064.16 GBP / 6,064.16 GBP	+ 756.77 GBP
Net Income	28,856.99 EUR / 24,692.61 GBP	23,935.84 GBP / 23,935.84 GBP	- 756.77 GBP
Overall Tax Rate	17.7 %	20.2 %	+ 2.50 %.

CGT is definitely higher (you have it at 33%), but you have lower VAT, stamp duty, and your equivalent of NI.

Corporation tax is one of the lowest at Europe, but it's a moot point to individuals. Your dividend tax rate is higher though.

 

[Pogue Mahone]

I just looked into Ireland taxes - some are higher, some are lower, but by in large they're pretty similar.

Income is taxed at 20% up to €40,000, and 40% for €40,000 and above. With that you get around €3,500 in a tax free amount which is uncapped based on how much you earn (in the UK your personal allowance is capped when you start earning over £100k). Certainly, for individuals who earn over £100k, the Irish tax system is a lot more appealing when comparing it to the UK (where the marginal tax rate is around 62% up to £125,000). Even in this example, where you're earning £30k/€35k, your take home pay is greater in Ireland:

	Ireland	UK	Diff in UK
Gross Income	35,059.47 EUR / 30,000.00 GBP	30,000.00 GBP / 30,000.00 GBP	- 0.00 GBP
Tax Due	6,202.48 EUR / 5,307.39 GBP	6,064.16 GBP / 6,064.16 GBP	+ 756.77 GBP
Net Income	28,856.99 EUR / 24,692.61 GBP	23,935.84 GBP / 23,935.84 GBP	- 756.77 GBP
Overall Tax Rate	17.7 %	20.2 %	+ 2.50 %.

CGT is definitely higher (you have it at 33%), but you have lower VAT, stamp duty, and your equivalent of NI.

Corporation tax is one of the lowest at Europe, but it's a moot point to individuals. Your dividend tax rate is higher though.

Don’t forget we pay PRSI and USC. Which is much higher than NI in the UK.

 

[711]

I just looked into Ireland taxes - some are higher, some are lower, but by in large they're pretty similar.

Income is taxed at 20% up to €40,000, and 40% for €40,000 and above. With that you get around €3,500 in a tax free amount which is uncapped based on how much you earn (in the UK your personal allowance is capped when you start earning over £100k). Certainly, for individuals who earn over £100k, the Irish tax system is a lot more appealing when comparing it to the UK (where the marginal tax rate is around 62% up to £125,000). Even in this example, where you're earning £30k/€35k, your take home pay is greater in Ireland:

	Ireland	UK	Diff in UK
Gross Income	35,059.47 EUR / 30,000.00 GBP	30,000.00 GBP / 30,000.00 GBP	- 0.00 GBP
Tax Due	6,202.48 EUR / 5,307.39 GBP	6,064.16 GBP / 6,064.16 GBP	+ 756.77 GBP
Net Income	28,856.99 EUR / 24,692.61 GBP	23,935.84 GBP / 23,935.84 GBP	- 756.77 GBP
Overall Tax Rate	17.7 %	20.2 %	+ 2.50 %.

CGT is definitely higher (you have it at 33%), but you have lower VAT, stamp duty, and your equivalent of NI.

Corporation tax is one of the lowest at Europe, but it's a moot point to individuals. Your dividend tax rate is higher though.

I suspect the EU, and maybe even the US, will make Ireland and others increase their corporation tax one day, as they see it as unfair competition.

 

[rimaldo]

I suspect the EU, and maybe even the US, will make Ireland and others increase their corporation tax one day, as they see it as unfair competition.

irexit means irexit.

 

[Maagge]

An unintended consequence of IT is the way it accelerates gentrification. I’ve lived in two different cities in areas that used to have predominantly middle/working class residents, over multiple generations, but the combination of a increase in property prices with inheritance tax means that more and more people can’t afford to inherit the family home. As soon as the oldest members of the family die, their kids are forced to sell up and move to a poorer neighbourhood, displaced by the very wealthy.

Do a lot of people generally move into their parents' homes when they pass away?
My parents have a nice enough home, but I wouldn't move there as its simply not anywhere near my job or my wife's for that matter. I think the default in Denmark is to sell off your deceased relatives' home.

 

[Pogue Mahone]

Do a lot of people generally move into their parents' homes when they pass away?
My parents have a nice enough home, but I wouldn't move there as its simply not anywhere near my job or my wife's for that matter. I think the default in Denmark is to sell off your deceased relatives' home.

I guess it depends. The type of suburbs where property prices have increased sharply over the last few decades are generally quite desirable places to live. So I’m sure most people born and reared in those areas would like to stay living there if they could afford to do so.

 

[Dan_F]

An unintended consequence of IT is the way it accelerates gentrification. I’ve lived in two different cities in areas that used to have predominantly middle/working class residents, over multiple generations, but the combination of a increase in property prices with inheritance tax means that more and more people can’t afford to inherit the family home. As soon as the oldest members of the family die, their kids are forced to sell up and move to a poorer neighbourhood, displaced by the very wealthy.

But they’ve just inherited an absolute fecking tonne of money? Why would they move to a poor neighbourhood. Unless the kids want to all live together as adults in the family home, that house will need to be sold to split the inheritance between them anyway.

There’s a lot of reasons for gentrification, I’m not sure inheritance tax is anywhere near the top of that list. Tighter rules on buying multiple properties and their purpose would help, but then again, that would likely prevent house prices rising, so we can’t have that!

 

[Pogue Mahone]

But they’ve just inherited an absolute fecking tonne of money? Why would they move to a poor neighbourhood. Unless the kids want to all live together as adults in the family home, that house will need to be sold to split the inheritance between them anyway.

There’s a lot of reasons for gentrification, I’m not sure inheritance tax is anywhere near the top of that list. Tighter rules on buying multiple properties and their purpose would help, but then again, that would likely prevent house prices rising, so we can’t have that!

They haven’t inherited a fecking tonne of money. They’ve inherited their family home (minus a chunk of it, which suddenly belongs to the state) I’m certainly not arguing that inheritance tax is anywhere near the top of the causes of gentrification. But I do think it’s a factor. Because it definitely puts pressure people to sell up and move out rather than continuing to live in the home/area they grew up in.

 

[Dan_F]

They haven’t inherited a fecking tonne of money. They’ve inherited their family home (minus a chunk of it, which suddenly belongs to the state) I’m certainly not arguing that inheritance tax is anywhere near the top of the causes of gentrification. But I do think it’s a factor. Because it definitely puts pressure people to sell up and move out rather than continuing to live in the home/area they grew up in.

But in your example of multiple people (siblings I guess?) inheriting the house, it would need to be sold, unless any of the recipients have the capital to pay off the others for their portions. They can’t all live together in the family home?

I genuinely think that the amount of older people who still live in the house where they raised their kids, plus the recipient even wanting to actually live in that house, is fairly small. Even smaller is the pool of those houses over the £500k/£1 million threshold. Plus taking out the ones where there isn’t cash or other assets in the estate to pay the tax.

I’m sure there are people in that situation, it’s probably not great, especially at the time having to deal with it. But I’m not sure it warrants scrapping the whole principle of taxing assets from the wealthier.

I fully encourage everyone with any form of substantial assets to get their shit in order before dying to make it easier on their family. I say this as someone who’s Grandad left an estate well over £500k and didn’t get it sorted, leaving my gran to deal with solicitors for 2 years and pay a tonne in tax and solicitor fees.