Inheritance Tax Anecdotal

[t1234]

I am guessing the reason your grandmother saved is so that she had no major money worries as her life went on and she had no other way of earning a living. She didn't want to be fully dependent on relatives or the state. Good for her.

I doubt her main worry was what will happen to her money after she was gone. For her the saving was worth it, I'm sure all that cash in the bank let her sleep better and worry less.

Your argument seems to be my grandmother saving all that money hasn't benefited me so what was the point ?

[saving since 2005]

Basically your saying that because she didn't spend everything she had, she wasn't 'living her life'? Isn't that the attitude that has got this country in such a mess? Spending every pound that they can get their hands on.

If she was 'living her life' she probably would not have lasted as long.

[rxe]

...countered by the non-dom land owners in the UK having to pay the LVT

...and the few thousand dynasties who own roughly 1/3 of the country finally paying some tax on their capacious holdings

...and the land-owning corporations

And wouldn't reduction of asset prices be a desirable outcome?

Seriously in danger of derailing the thread here. However.....

I don't see LVT as any less distorting than IHT. You can decide to abolish IHT and switch to LVT. So people with assets other than land get away with far less IHT. God knows what other assets they will buy - commodities? And the general meme that "people who have a lot of land are bad and should pay" doesn't really stand up to inspection. Top 10 landowers here:

http://www.countrylife.co.uk/countryside/article/506868/Who-owns-Britain-Top-UK-landowners.html

Apart from a couple of Dukes who own some god forsaken part of Scotland (which if you made it expensive would just be abandoned), I don't see many juicy targets.

The good thing about IHT, is that if it is due, there is the means to pay it. This is also the case with income tax, which is why it is so popular with governments. Whether a reduction is asset prices is a desirable outcome depends on where you sit (a lot of voters would disagree....). What I hugely disagree with is the government interfering in something to manipulate the price. This applies to both LVT and all the tax breaks that housing gets (which are one of the reasons prices are so high today).

[Si1]

Seriously in danger of derailing the thread here. However.....

I don't see LVT as any less distorting than IHT. You can decide to abolish IHT and switch to LVT. So people with assets other than land get away with far less IHT. God knows what other assets they will buy - commodities? And the general meme that "people who have a lot of land are bad and should pay" doesn't really stand up to inspection. Top 10 landowers here:

http://www.countryli...landowners.html

Apart from a couple of Dukes who own some god forsaken part of Scotland (which if you made it expensive would just be abandoned), I don't see many juicy targets.

The good thing about IHT, is that if it is due, there is the means to pay it. This is also the case with income tax, which is why it is so popular with governments. Whether a reduction is asset prices is a desirable outcome depends on where you sit (a lot of voters would disagree....). What I hugely disagree with is the government interfering in something to manipulate the price. This applies to both LVT and all the tax breaks that housing gets (which are one of the reasons prices are so high today).

LVT is supposed to distort the market against land, that is the whole point, as land's utility is irreplaceable given the limitations of geography, whereas, say, a tonne of coal's utility is entirely replaceable, and therefore a less emotive and less poverty-inducing good to be thus affected by bubbles

[Democorruptcy]

What a forward thinker and patriot. Saving all that money money because she realised our debt pile would be so large and the country needed her help.

Don't forget to check her sock drawer and mattress. Any loose floorboards?

[crashmonitor]

What a forward thinker and patriot. Saving all that money money because she realised our debt pile would be so large and the country needed her help.

Don't forget to check her sock drawer and mattress. Any loose floorboards?

If everybody was in receipt of state pension for 44 years funded by a working life of 45 years (15-60) tyhe country would be truly bankrupt. I do not expect my 52 years (15-67) to cover my costs.

[fluffy666]

If everybody was in receipt of state pension for 44 years funded by a working life of 45 years (15-60) tyhe country would be truly bankrupt. I do not expect my 52 years (15-67) to cover my costs.

I'd expect 52 years of full time proper work to cover mine.

Mind you, I'd be 79 when I retired..

[Bruce Banner]

I'd expect 52 years of full time proper work to cover mine.

Mind you, I'd be 79 when I retired..

It doesn't take that much to cover your own State Pension. It's covering everyone else's that's the difficult bit.

[Austin Allegro]

Sorry to hear about your granny, but what a good age to reach. I hope she was able to live a reasonably full life until the end (and no, I don't mean spending loads of money, which doesn't buy happiness).

I think a lesson from this is that it shows how detached from reality property prices are. If the house had been a sensible price, it would probably be around 80k, leaving her total assets not much over the inheritance tax limit.

What I'm trying to say is that she was not taxed on her savings, she was taxed on the lunacy of house prices, which are not 'real' money. It's not a reason not to save money.

[the shaping machine]

Finally - my view on IHT - should be considered from the beneficiary's perspective, rather than the other way around.

Yes, we don't actually have an inheritance tax in the UK, we have a death tax.

A cash inheritance should be taxed as simple income.

[blackgoose]

I am in favour of a progressive land value tax, and closing loopholes in IHT. I can't see why farmland isn't subject to IHT.

I agree that IHT should apply to farmland. The reason that it has not been made so is that the landed aristocracy have dominated the house of lords since formation, and still have a strong presence.

[the shaping machine]

The reason that it has not been made so is that the landed aristocracy have dominated the house of lords since formation, and still have a strong presence.

Or maybe private farms are already financially touch and go in the UK as it is, and adding an extra tax burden would destroy the entire sector?

I think some people need to put down their Jane Austin novels, the "landed aristocracy" have been irrelevant for a century or more.

[The Ayatollah Buggeri]

Basically your saying that because she didn't spend everything she had, she wasn't 'living her life'? Isn't that the attitude that has got this country in such a mess? Spending every pound that they can get their hands on.

Not quite. I'm saying that, had she seen the issue in those terms (and I very much doubt if she did), she'd have known that she had a simple choice of what to do with a significant chunk of her estate: spend it on herself during her lifetime, or give it to the taxman after she dies. I am further arguing that the existence of such a choice invokes moral hazard, as many people will take one look at what the taxman is likely to do with such a windfall, and then decide to spend it on themselves.

I think a lesson from this is that it shows how detached from reality property prices are. If the house had been a sensible price, it would probably be around 80k, leaving her total assets not much over the inheritance tax limit.

What I'm trying to say is that she was not taxed on her savings, she was taxed on the lunacy of house prices, which are not 'real' money. It's not a reason not to save money.

Agreed completely, and if you want to be really cynical about it, one of the many reasons why the government wants to stave off a proper HPC at all costs is because while house prices remain unsustainably inflated, they will receive a regular stream of IHT income as OOs in Granny's position keel over.

[Gigantic Purple Slug]

Not quite. I'm saying that, had she seen the issue in those terms (and I very much doubt if she did), she'd have known that she had a simple choice of what to do with a significant chunk of her estate: spend it on herself during her lifetime, or give it to the taxman after she dies. I am further arguing that the existence of such a choice invokes moral hazard, as many people will take one look at what the taxman is likely to do with such a windfall, and then decide to spend it on themselves.

Agreed completely, and if you want to be really cynical about it, one of the many reasons why the government wants to stave off a proper HPC at all costs is because while house prices remain unsustainably inflated, they will receive a regular stream of IHT income as OOs in Granny's position keel over.

Not wanting to make a personal attack on your Granny (who I am sure was a fine lady), I'm not sure what the government taxing me so it can give the money to old ladies so they can squirrel it away in bank accounts does for me.

Come to think of it, I can't see what it does for her either. Or anyone else.

[sleepwello'nights]

I doubt her main worry was what will happen to her money after she was gone. For her the saving was worth it, I'm sure all that cash in the bank let her sleep better and worry less.

Your argument seems to be my grandmother saving all that money hasn't benefited me so what was the point ?

I think The Ayatollah was saying she could have lived much more comfortably if she hadn't saved so much and spent more.

For some people the joy they get from saving or having it as a comfort cushion is more enjoyable than the pleasure they derive from spending it.

[leicestersq]

Or maybe private farms are already financially touch and go in the UK as it is, and adding an extra tax burden would destroy the entire sector?

I think some people need to put down their Jane Austin novels, the "landed aristocracy" have been irrelevant for a century or more.

An inheritance tax doesn't affect the day to day costs of a farm. Lots of farms are nowhere near the edge these days anyway.

[the shaping machine]

An inheritance tax doesn't affect the day to day costs of a farm. Lots of farms are nowhere near the edge these days anyway.

Having to pay 40% of the theoretical value of the farm at point of inheritance would mean that within a generation most farms would be owned by large corporate entities (corporations don't die so don't pay the death tax).

What possible social good would this change achieve?

[Nuggets Mahoney]

Having to pay 40% of the theoretical value of the farm at point of inheritance would mean that within a generation most farms would be owned by large corporate entities (corporations don't die so don't pay the death tax).

What possible social good would this change achieve?

Revenue is the first thing that comes to mind

A whacky idea when it comes to the subject of taxation, but there you go

[AteMoose]

Having to pay 40% of the theoretical value of the farm at point of inheritance would mean that within a generation most farms would be owned by large corporate entities (corporations don't die so don't pay the death tax).

What possible social good would this change achieve?

and the corporation passed from father to son before the father dies... its an alternative way of wrapping the same cat....

[the shaping machine]

Revenue is the first thing that comes to mind

A whacky idea when it comes to the subject of taxation, but there you go

You'd get one generation of extra revenue then nothing (remember IHT only raises about 2.5 billion in total).

[Nuggets Mahoney]

You'd get one generation of extra revenue then nothing (remember IHT only raises about 2.5 billion in total).

So?

That's one generation of extra loot more than the rest of us currently get

What benefit do the rest of us get from subsidising a dynastic farming system?

Why should land owners be shielded from the harsh economic 'realities' the rest of us have to suck on? Are they special in some way?

I agree that the 'immortality' of corporations is an issue wrt IHT, same as non-doms and, yes, land owning dynasties. I can understand why all of these VIs would prefer IHT over a LVT

Edited February 14, 2012 by Nuggets Mahoney

[Nuggets Mahoney]

You'd get one generation of extra revenue then nothing (remember IHT only raises about 2.5 billion in total).

I do remember, which is why I believe IHT is a daft tax

Ordinary people get behind it because they see it as some kind of great equalizer when, in practice, it's nothing of the sort

[easy2012]

Not quite. I'm saying that, had she seen the issue in those terms (and I very much doubt if she did), she'd have known that she had a simple choice of what to do with a significant chunk of her estate: spend it on herself during her lifetime, or give it to the taxman after she dies. I am further arguing that the existence of such a choice invokes moral hazard, as many people will take one look at what the taxman is likely to do with such a windfall, and then decide to spend it on themselves.

Agreed completely, and if you want to be really cynical about it, one of the many reasons why the government wants to stave off a proper HPC at all costs is because while house prices remain unsustainably inflated, they will receive a regular stream of IHT income as OOs in Granny's position keel over.

Firstly, sorry to learn about the lost of your granny.

Few points:

[1] This shows what compound interest can do over long period of time (this should explain the £250k cash)

[2] As already mentioned, it is 40% over the 325k, so that is 40% on the 270k ish, and so there is about 100k tax there.

If your family does not one to pay the tax, then do a deeds of variation to give those above the threshold to a charity (or set a charity

up and give the money to the charity, then employ your unemployed family member to run it).

[3] There were ways to avoid the 40% altogether and if planned earlier, obviously a bit later now.

Enlightened countries like US has a threshold of $5million and in Singapore, the threshold is SGD9m (so about £4.5 m).

I am for applying IHT to, say a sum above £25m without exemption rather than trapping the moderate estate with lots of loopholes

for bigger ones as mentioned above.

[Bob Loblaw]

Are you obliged to sell the house at its 'true' value? What if you were to sell it for £75k?

[easy2012]

Are you obliged to sell the house at its 'true' value? What if you were to sell it for £75k?

You just have to pay the tax at probate valuation, sell it or not, or how to raise the cash is up to the executor.

Most estate will invite probate that brings the value of the estate down slightly (to the extend they can

get away with).

FURTHER:

Allowable expenses

It is possible to deduct certain expenses from the value of an estate before calculating IHT. Allowable expenses include

Funeral costs

Debts owed in the UK

Tax owed at time of death

Probate fees and executors expenses are not deductable

Edited February 14, 2012 by easy2012