Inheritance tax. WTF is the matter with this bullshit?

Posted by SmurfSmacker@reddit | AskUK | View on Reddit | 207 comments

Seriously, what the fuck. I would like to make it clear that I personally, am not due an inheritance, but a friend of mine is. So let me get this straight… My friends’ parents’ estate (a house, savings and 3 cars) are all fully paid off. They worked their entire lives for this, for the things they own and also to leave their kids the best they could. The remainder of their pensions apparently goes straight to the government as well. They paid tax on their income their whole lives. They paid tax when they earnt anything, bought anything, and paid tax for interest on their savings. Now, when they die, (he only has one parent left), the government is going to say, “yes it’s sad your parents are dead; now give us 47% of the value of the things they own”. How the fuck does this make sense? Have I overlooked anything here? I have told her to get in contact with a solicitor, and a financial specialist (manager?) to see what’s what and how to minimise the tax that she would be liable for. I only ask, as from the outside, this looks like a massive fuck you from the UK government. Sorry for the rant, but I just could not believe it when she called me earlier.

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deleted_by_reddit@reddit

[removed]

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AskUK-ModTeam@reddit

Don't be a dick to each other, or other subreddits, places, or people. Don't be a dick to each other, or other subreddits, places, or people. AskUK contains a variety of ages, experiences, and backgrounds - consider not everyone is operating on the same level or background as you. Listen to others before you respond, and be courteous when doing so.

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Ok_Difficulty5@reddit

It’s a tax on the middle class, the rich people have estate plans, trusts and the like to avoid this issue

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jimicus@reddit

It didn’t used to be. Relative to house prices, the threshold has hardly moved in decades.

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SnowflakeMods2@reddit

It was doubled in the last decade.

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jimicus@reddit

That’s nice. The house I grew up in is worth about £750k; mum bought it in the 1990’s for about a tenth of that.

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SnowflakeMods2@reddit

And every single penny of that increase in value of that property has been exempt from taxation. No other asset with capital appreciation is exempt. Your mum didnt do anything to add value to that, she just bought it for X and now it is worth Y. If it was a widget there would be tax due.

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COBHC95@reddit

Is it a capital gain when adjusted for inflation though?

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SnowflakeMods2@reddit

Massively so.

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Capheinated@reddit

>The house I grew up in is worth about £750k; mum bought it in the 1990’s for about a tenth of that. great argument for IHT that is.

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AutumnSunshiiine@reddit

Would you like house prices to drop back down to what your parents paid for theirs? I’ll even be generous and let you include the interest they paid. Thats what they “worked” for. You wouldn’t have to worry about IHT then. Oh no, wait, you want to have your cake and eat it. With a cherry on top.

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COBHC95@reddit

What if he wanted to live in the house (regardless of its value in today's money) and didn't care about selling it? If his parents own a house (which happens to now be worth £700k for example) why shouldn't he be allowed to live in it?

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AutumnSunshiiine@reddit

He can live in it if he chooses, if the property is left to him. But he still needs to pay the IHT. Unless the parents bought the property only very recently, the majority of that £700k was not what they “worked” for. Their money is not being “lost” or “wasted”.

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COBHC95@reddit

But it could be argued that they worked hard for him to have a house in London for example, and now when they die he has to pay hundreds of thousands to live there. It's like if I worked hard for my children to have a car, & imagine car prices went up 20 times...just because car prices are 20 times what they used to be doesn't mean the government should take half of it.

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AutumnSunshiiine@reddit

He still benefits. He gets more than what they paid, there is no mention that they recently bought the house — and the second parent was still alive at the time of the post. In the very niche example of:- 1) parents buying a house *for the first time* using cash from earnings 2) the house/estate being over the IHT threshold 3) both parents die within a year or two of buying the house …yes that would suck. But that’s an exceptionally rare situation to be in.

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OllieRoff@reddit

I'm in this situation at the moment. Like the initial poster I am not due to inherit anything but my Grandma has left her house and remaining money (30k ish) to my Uncle who has lived with her his entire life as he has learning disabilities. My mum and dad have both passed away so I am the executor of the will. My uncle has the house setup for him and cannot deal with change. My Gran paid off the house a long time ago when it was not worth what it is today (in South London so now about 700k). With the inheritance well past the tax free threshold the tax bill will be well over 100k. The only way to get the money for the tax is to sell the house. ABSOLUTELY BONKERS - fine to pay taxes when my Uncle dies but how is there not a fair and compassionate system to deal with situations like this.

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PerceptionGreat2439@reddit

Wait til you find out the 20% on your pension.

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Mimi-the-magnificent@reddit

>Sorry for the rant, but I just could not believe it when she called me earlier. The fact you and your friend has never heard of inheritance tax is astounding Also a special shout out to the fact your friend seems more concerned with her inheritance than the fact her parents have died Double shout out to you who rather than try to comfort her have decided to vent on Reddit about some shit that doesn't concern you

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CaradocX@reddit

Injustice committed against the dead is worse than injustice against the living. The dead are unable to fight back. Nice attempt at deflection though.

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cizza16@reddit

Yeah but the dead don’t give a shit

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CaradocX@reddit

No. But the living do. Put it this way, if the graves of your Grandparents were to be vandalised, their corpses dug up and violated. Your Grandparents wouldn't give a shit. But you would. Those are all crimes, should they be decriminalised?

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cizza16@reddit

That crime would be way worse if done to alive people, so no the crime against dead isn’t worse than those alive as you originally claimed, even in your insane example

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shit-sandw1ch@reddit

Anybody who cares about their parents and not just money would be sad their parents are gone and, while they’d be grateful for the inheritance, it would do very little to cushion the blow. If you really care about your parents hard work in relation to their money, you should be convincing them to retire and sell everything and go live the lavish as fuck life THEY worked so hard for. And if what they want is for you to have it, then they can gift it to you. And you, being the amazing caring child who wants them to have everything they worked for, will let them continue to live in that house as if it was still their own and spend/enjoy any other assets as if it was their own. But my guess is most parents don’t expect or trust their kids to do that so don’t, especially the adult kids who think their parents money is theirs.

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CaradocX@reddit

Please point to the part of the post where OP claims that they, or their friend are not sad at the loss of friend's parents. You can't, because it doesn't exist. Absence of evidence is not evidence of absence. Reddit policies require staying on topic. The topic is inheritance tax, not I'm in mourning for the death of my friend's parents. What you are doing is deflecting by saying - you can't complain about this unfair tax at the point the tax is applied, because you should be in mourning. At which point you eliminate 95% of people complaining about the tax - because as this post makes absolutely clear, people don't even realise the tax exists until it falls on them when it's too late to make the appropriate legal necessities. Plus the seven year thing is pure bullshit when applying to old people. When exactly are people allowed to complain about inheritance tax? When Shit-Sandw1ch gives them permission to do so? As such, this line of attack on the OP is just utter bollocks and is frankly demeaning to anyone who uses it. As to your other point. No, no one should be trying to convince elderly parents to sell anything that has taken them a lifetime to acquire. Government is making you jump through hoops in order to keep what your family owns knowing full well that the conditions they have imposed will deter most from choosing, or being able to do so. It's legalised theft pure and simple.

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Mimi-the-magnificent@reddit

Take it you have never seen the walking dead?

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CaradocX@reddit

Why yes, I have seen many examples of the entirely fictional zombie genre that allegorises the horror of humans acting together as a crowd without any kind of rational thought in order to attack and destroy the rational individual that tries to fight back against the cannibalism of group think. Have you?

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Dapper_Otters@reddit

It's almost as if they already had an axe to grind and just made up a paper thin story.

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CliffyGiro@reddit

Kind of feel like whining about paying 40% when you’ve exhausted the £325,000 tax free allowance is a bit ridiculous. I stand to inherit the grand sum of £0.00. I’d be fucking grateful for £325,000 that’s for absolutely sure.

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CoffeeIgnoramus@reddit

I'm not sure that's a fair comment. They aren't being given free money by the government, they're just wanting to have their parent's possessions. However, they can't collect their parents' belongings without being taxed because they died before signing it all over to them 7 years earlier. The objects had already been taxed when they were bought. So despite being in the family, they now have to pay again to keep family stuff in the family. I think even you can see how that feels like a kick in the undercarriage just after you lose your parents. Imagine you bought a present for a friend or family and as you handed the present over, someone from the government would walk up and ask your friend or family to pay up part of the value of the present you'd already paid for. I understand that there is an issue with the wealthy getting wealthier and that this should reduce that (although there are too many loopholes), but there is also sentimental value to everything your parents owned.

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CliffyGiro@reddit

If you’re fortunate enough to pay even a penny in inheritance tax then you are fortunate enough. I’m sorry if I’m struggling to drum up sympathy for someone who stands to inherit a vast sum of money and assets. Of all the problems to have in the world that’s an absolutely brilliant problem to have. Let’s not forget most people with rich parents benefit from the privilege that gives them throughout their lives as well. If life goes to plan my own children will pay inheritance tax, rightfully fucking so. They didn’t earn it, I did and I’m dead so I can’t spend it.

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Pinkelderflower@reddit

Here we go with tall poppy syndrome. It’s no wonder the government can impose such high taxes… people are happy to keep them more money.

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xdlols@reddit

I’ve worked harder for my income than inheritance yet income is taxed out the wazoo. People should be happy about getting any inheritance at all.

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Pinkelderflower@reddit

I agree that income tax is ridiculously high. I also believe that the inheritance tax threshold is ridiculously low and targets ordinary people rather than super wealthy people. My question is still the same… why does the government deserve your savings more than your children?

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mupps-l@reddit

4% of deaths results in a IHT charge. Parents can leave £1,000,000 to their children tax free. If anything is ridiculously low it’s the % of estates where IHT is due.

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Pinkelderflower@reddit

It’s 500k and that includes property. Once again, why do you feel the government deserves to have your already taxed money more than your children?

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mupps-l@reddit

500k per parent that as long as they’re married can be combined upon the death of the second parent. Hence parents can pass £1,000,000 to their children without a IHT charge. If any of the value of the estate came from property price increase then it won’t have been taxed previously. We live in a society taxes are the cost of that, why do you feel so entitled to money you didn’t work for? For the beneficiaries it’s unearned income and should be taxed far higher than earned income.

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Pinkelderflower@reddit

“…as long as they are married” with the rate of divorce and single parents, at least half of people can’t count on that. Once again, why do you feel the government is entitled to money they didn’t work for over your children? Who says children don’t work for it? For instance, my in laws live with me and are outraged at the thought of giving the government a penny of their already taxed money over my self and my partner who actually look after them. I don’t need the money and actively encourage them to spend it all to avoid giving the government anything, but they’re from a different generation and feel it’s a kind of legacy to leave something. I’m annoyed on principle as many people might find their family homes having to be sold to pay for an inheritance tax bill.

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mupps-l@reddit

A single person will in all likelihood accumulate less assets than a married couple. Why do they need a bigger allowance? Taxes are part of living in a society, I want my children to have the same safety net and better public services than we do now. Once again why do you feel entitled to money you didn’t work for? If any of the value of the estate is made up of in increase in value of property then it’s not been previously taxed. They can leave £1,000,000 tax free to their children. That’s a pretty good legacy right there. The 40% rate only kicks in on the amount over that £1,000,000.

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Pinkelderflower@reddit

To answer your first question, single or not house prices are very high. They aren’t coming down as we have a housing shortage, so a single person passing on a property worth 550k will mean their child will have to pay £20k in taxes. Not everyone has £20k sitting around and it’s likely they will have to sell the family home to pay the tax bill. This should not be happening. It’s worth noting that I’m not British so I don’t believe £550k signifies wealth.

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mupps-l@reddit

A 550k property is well over average. The 530k the child would be left with means they could live mortgage free in the overwhelming majority of the country. Under 4% of estates pay any IHT at present. That % is far too low. Doesn’t really matter that you’re not British. Give basically anyone in the UK £500,000 tax free and it would drastically improve their current situation. You could reduce that further and the same would still be true.

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Pinkelderflower@reddit

You seem to be unable to answer the question of why the government deserves more of your already taxed money over your family? It certainly does matter that I’m not British. I don’t have the same hang ups about income and wealth. I don’t sneer when someone does well for themselves, I’m happy for them. I don’t believe that over taxing individuals for doing well in life makes sense.

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mupps-l@reddit

We live in a society and there are costs to that. IHT is one of the best taxes we have, in an ideal world it would be significantly higher and the loopholes closed and taxes on income lower but here we are. The double tax thing is nonsense, firstly a significant part of a significant amount of estates will be made up on untaxed capital gain of property prices. Second when you buy something in a shop with “already taxed money” you pay VAT, it’s almost like it’s transactions that are taxed… It doesn’t matter that you’re not British. Most people in the UK are anti IHT, most because they believe it will apply to them rather than the less than 4% of estates that it currently does. That % is far too low.

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Pinkelderflower@reddit

It quite obvious that we won’t agree on this. It is double taxation. The U.K. loves to double tax, as you’ve pointed out. The outrageous costs of living in this society have put the country into a recession. I don’t see the value for money and I expect most people don’t.

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mupps-l@reddit

Love how you consistently ignore the untaxed gain in property prices as part of this. And taxes applying to transactions rather than money.

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Pinkelderflower@reddit

It’s not subject to capital gains tax if it’s a primary home.

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Pinkelderflower@reddit

Love how you still can’t answer why the government is more deserving of your money than your family.

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Pinkelderflower@reddit

Some taxes are, obscene taxes are not. We are the highest we’ve been taxed in decades and I don’t see any benefits. We still have a health service that doesn’t work, crime everywhere, crumbling infrastructure, homelessness, child poverty, food bank usage at a record high… where it is all going? I’m tired of throwing more money at a government so they can mismanage it. I do not believe this is party specific. Every government mismanages tax money. Once again- why do you think the government deserves to get money they haven’t worked for and have already taxed over your family? And to further the point, who says I’m not working for it? I have already stated that my in laws live with myself and my partner. We look after them, we pay the bills, we cook for them, we pay for private healthcare since you can’t get a doctor’s appointment… we do everything. The government does nothing. I’m in a fortunate position because I don’t need an inheritance, but other people are not.

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mupps-l@reddit

You seem to have a very libertarian view on taxes. The libertarian wet dream of small government no taxes is awful for everyone who isn’t uber wealthy. Looking after your in laws and paying the bills doesn’t mean you’ve worked for any inheritance. Basically comical to even suggest that.

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Pinkelderflower@reddit

I don’t think I said anything about no taxes. We are over taxed. There isn’t any way around that. I’m not sure how that’s comical. You think it’s comical to be a carer? Seems insulting to people who do this as a profession. The government certainly hasn’t done anything for them except promise to tax them twice.

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mupps-l@reddit

It’s comical to think caring for someone entitles you to inherit their estate tax free yes. Especially when there’s in effect a nil rate band of £1,000,000 and it’s only over that value tax has to be paid.

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Pinkelderflower@reddit

It’s comical to think that already taxed money should be taxed again. The government is not entitled to people’s money. Again, this isn’t for me as they won’t be getting my families or my money, but for other people it really does matter when they get a large tax bill suddenly. As we’ve already discussed, the £1m is for married couples.

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mupps-l@reddit

Money isn’t taxed. Transactions are. That’s how the financial system works. Unearned money should be taxed at a significantly higher rate than earned. Parents can pass 1mill to children either way. There are advantages for married couples sure but inheritance isn’t the only place where that’s true.

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kxxxxxzy@reddit

“The government” is an interesting way to put it”spent on vital services keeping the society running”

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Pinkelderflower@reddit

…is it running? I wonder where you live? It’s certainly looks like it’s falling apart from where I’m standing. They are getting more taxes and doing less with it. We have infrastructure crumbling, crime up, NHS in crisis, housing shortage, food bank usage up, unaffordable utilities, and widespread pollution. Perhaps the government should learn to spend money wisely like the rest of us have to.

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CoffeeIgnoramus@reddit

Absolutely genuine questions, not an argument, just want to understand your stance: Where is the line for you on tax to government vs your kids? 50/50? 75/25? Would you be ok with the government taking 100% of the inheritance and leaving 0% to your kids. As they should be happy if they got any? - And does the government in power affect how you would feel about giving them your stuff over your kids? - Also, why would you rather give your money to government over your kids? Just out of principle that you think we all should be giving a bit more to help the government and this is a logical source?

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CliffyGiro@reddit

The U.K. isn’t actually an especially high tax country. There’s no tall poppy syndrome here either, quite happy to see people succeed in life. Not sure you’ve really used that phrase correctly to be honest.

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Pinkelderflower@reddit

I have used the phrase correctly. Saying “if you’re fortunate to pay inheritance tax, then your fortunate enough” or “I’m struggling to drum up sympathy for someone who stands to inherit a vast sum of money” is exactly tall poppy syndrome. It certainly doesn’t sound like you’re happy to see people succeed. It sounds like you have a chip on your shoulder. The U.K. taxes are shockingly high and the pay bands are shockingly low. Not only is income tax and NI high, but you also have many other taxes to pay for. So I’ll ask again… why do you believe the government is more deserving of your money than your children?

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Ayearinbooks@reddit

You missed they expected to pay inheritance tax themselves which doesn't really work with the tall poppy thing. I'm a high earner and so pay higher tax rates than low earners. My parents did well so I'll pay tax on their estate and my kids will on mine. Im fine with this because I want properly funded public services etc and as high earners and people receiving massive unearned windfalls can afford to pay tax much more than people on lower incomes can.

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Neither_Benefit2662@reddit

You would pay more tax if we had a flat tax since, as you mentioned, you are a high earner. Given that, it seems you are suggesting that higher earners should have an additional component/ components of taxation, is that a fair assessment?

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Ayearinbooks@reddit

I believe tax should be progressive yes.

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Neither_Benefit2662@reddit

A component of tax determined by your level of financial success sounds exactly like tall poppy syndrome to me…

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Ayearinbooks@reddit

Not at all. I don't dislike successful people or want to bring them down. I just think they (we) are more able to contribute to public goods than poor people.

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IllCorgi9108@reddit

Uk taxes are shockingly low compared to countries with decent public services, and when I say decent I mean functioning.

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CliffyGiro@reddit

You are wrong. The U.K. is about average in terms of GDP vs taxation. It’s a fact of you stand to inherit so much money that you have to pay inheritance tax then you are very fortunate. Fortunate enough. Running a country is expensive, supporting the welfare state and NHS is expensive. I’m happy to contribute to the cost of these services. I’m not going to engage in your straw man argument about the government deserving anything, it’s nothing to do with that. It’s to do with the fact that I’m happy to fund the public purse. Maybe you being an American makes you a bit more of selfish, self centred greedy person. I’m not sure.

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KeyJunket1175@reddit

Sounds like the general consensus in the UK - at least on this reddit - is that the government is more worthy of your hard earned money than your family. Your children didn't earn it, sure.. does that mean the government did earn it then? Why don't you give them all of it?

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mupps-l@reddit

Parents can pass £1,000,000 tax free to their children. My parents bought a house for 60k 30 years ago. It’s now worth over 400k, they’ve paid 0 tax on that capital gain of 340k. As things stand the value of their estate will be overwhelmingly made up of the house value. As things stand the value of their house could double and their estate would still be 6 figures away from having any IHT due.

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CoffeeIgnoramus@reddit

https://www.gov.uk/inheritance-tax

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wolfwalke@reddit

Point missed

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amacadabra@reddit

I think it would be better if the tax were much more unavoidable and the rates were higher (topping out at 100% above some large number of millions) but to answer the original question - yes, they acquired the money and so may have some "entitlement" to it, but you didn't, and you don't.

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Boniouk84@reddit

They get £325k allowance plus i think a further £175k on a property so £500k tax free. Then it’s 40%. It’s being taxed because it’s the parents’ possessions, not the childrens. If the parent’s wanted it to be tax free then they can gift it to the child and then live for 7 more years meaning no tax owed.

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AlmightyRobert@reddit

A married couple with.a house get a total of £1m allowance. After that it’s 40%. The allowance only starts reducing to £500k if the estate(s) are bigger than £2m. OPs rant is entertaining but mostly wrong on facts and stuff.

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RagerRambo@reddit

The issue is it includes property in the UK. For better or for worse, many properties are now over £1m when you look at the SE. Modest houses, so it's much more likely that you'll eventually be caught in the IHT net. Also, is it fair that anyone but married couples, are penalised for gifting their assets?

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superwisk@reddit

There are hardly any houses worth over £1m. Looking at Zoopla the average house price is £475k. Even for detached houses it's £750k. These aren't modest houses.

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RagerRambo@reddit

Where are you looking? If you want to live anywhere decent in London, with good schools, you'll be in an area with detached houses in excess of a £1m

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blind_disparity@reddit

I guess you're talking about London and surrounding areas? So extremely expensive places where you need to be well off to afford a 'modest' house. £1m is still a luxury property in most of the south AFAIK.

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RagerRambo@reddit

It certainly isn't. No disrespect intended but please look at right move for one bed flats in central London. Then look at semi detached houses anywhere decent

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blind_disparity@reddit

I see a 4 bed terraced in central London for 800k and 2 bed apartments for under 600

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blind_disparity@reddit

Define 'anywhere decent'

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mupps-l@reddit

Married couples can in effect pool their allowance. Personally I don’t see an issue with that. I also don’t have an issue with property being included, no tax is ever paid on the gain in value of that property something that people forget. And unpopular opinion time, more estates should be paying inheritance tax, 3.7% I think it currently is.

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RagerRambo@reddit

What's bad with cohabiting couples, or siblings pooling their resources?

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mupps-l@reddit

A cohabiting couple still get £500k each, they’d just need to leave their assets to their children rather than partner.

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RagerRambo@reddit

But the cohabiting couple are not exempt when one partner passes, above the threshold, like a married couple. So IHT will be due then, and again when passed to children. Also inheritance isn't for the benefit of children only. The person should chose to give it to a blood relation, and thus I believe the 500k exemption doesn't apply.

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gagagagaNope@reddit

Indeed. Ours is a 3 bed bungalow that alone uses way more than the allowance for 2. We're not even in London. Inheritance tax and stamp duty, if they must have them should be regional and based on average prices. It's utterly unfair that a person in the SE buying a tiny starter flat will pay more stamp duty than a family buying a 5 bed detached in the NE.

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RagerRambo@reddit

Don't bother with reason. I also enjoy seeing how vastly different Reddit viewpoint is to the populus

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Kaliasluke@reddit

The surviving parent could also potentially have inherited the tax bands of the deceased parent (assuming they’re married and left everything to each other first). In that case, it’s double - £1m tax-free, then 40% over £1m. Anything in a pension pot will also pass outside of the estate, tax-free, plus the proceeds of any love insurance policies.

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Danny_P_UK@reddit

In theory. If you had multiple houses. If you knew you were going to die. Could you sell the extra houses, put the proceeds into a pension and basically pass the cash on tax free? Basically liquidate everything and shield it in a pension?

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Kaliasluke@reddit

If you’re not in drawdown, you could contribute the higher of £60k or your taxable income for the year. If your pension is already in drawdown the max contribution is £10k.

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Danny_P_UK@reddit

Ah got ya. Thanks.

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Suttisan@reddit

Yeah this is what a friend did, and just aswell his dad died just after the 7 years was up,he now owns all 3 of his dad's houses and has retired at 50.

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Redira_@reddit

>now give us 47% of the value of the things they own It's 40% of whatever exceeds the threshold of £325,000.

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PowerfulAssHole@reddit

The point is the parents worked to pay for everything, got tax decucted from their earnings and already paid tax on everything they purchased. So why on earth should the government be entitled to any of it? At that point it's just theft. If the parents wanted to leave their inheritance behind for the government rather than their own family then I'm sure they would've put that in their will.

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yeahyeahitsmeshhh@reddit

The kids didn't do an ounce of work though and we tax people who are earning money from their jobs. I don't see why anyone coming into more than the £325k threshold minds paying a 40% tax on anything above. Money circulates and is taxed at almost every step; income tax, VAT. This is no different.

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iplaydofus@reddit

Slightly off this topic, but for me it’s frustrating how many taxation avenues there are. I pay 40% income tax, national insurance, council tax, VAT, inheritance tax, and yet I still have to pay the council to collect my garden waste bin and the normal bin collection has gone down to once every two weeks, potholes left in roads for ages, ridiculous nhs waiting times, parks and public land unmaintained. I’d be more than happy to pay all this tax if the services I got from it were satisfactory, instead half it goes into corrupt politicians and their mates pockets and the public services get worse and worse.

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yeahyeahitsmeshhh@reddit

Not half. Honestly I think there should be inheritance tax, land value tax, corporation tax, income tax and specific set of market biasing taxes (e.g. fuel duty subsidising electric cars). I'm not convinced other taxes are better than just increasing those ones.

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iplaydofus@reddit

Half was definitely hyperbole, feel like my point is still valid though. The tax is not the issue to me, it’s the fact I pay all this tax and the countries public services are gradually getting worse and worse.

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yeahyeahitsmeshhh@reddit

Time for a change of government.

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RagerRambo@reddit

Parents work hard and sacrifice in their own lives to pass it on to their children, without expecting their children to work for inheritance. Also, lottery winners don't work for their prize, but are not taxed. As OP states, tax has already been paid at all points, and transfer of money does not benefit the parent i.e. they must lose, for child to gain, so it's net neutral.

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yeahyeahitsmeshhh@reddit

Nonsense. The dead parent loses nothing. The children are engaged in the least useful economic activity; collecting money for nothing. It's the single best source of tax available. The starting threshold is £325k and most estates don't pay a penny. They're still getting plenty and have nothing to complain about.

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RagerRambo@reddit

Dead or not, that money was earned and taxed already. As other comments have said, many average estates exceed the thresholds due to house prices, and fiscal drag (thresholds not going up so more estates impacted). It's disingenuous if you are not impacted to claim inheriting children should be grateful they get anything. If you want to ensure all your wealth is given away, go right ahead, but for many, they sacrifice to give their children a better life.

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yeahyeahitsmeshhh@reddit

>Dead or not, that money was earned and taxed already. Money is never just taxed once when it passes through different hands. Only about 10% of estates pay any inheritance tax. It is a tax on the wealthy and dead. Not average estates at all. Most beneficiaries are middle aged with homes of their own. If they are inheriting an above average home they can afford to pay some tax on the windfall. Why on earth should this desire to build and preserve family wealth be untaxed when working for a living has to be?

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RagerRambo@reddit

The picture you paint is one of old wealth hoarding money. That may true, but what about recently acquired wealth, or those that have worked very hard to be in such a position. Already top 1% of earners pay 30% of all tax collected. It's only increasing as well. >Why on earth should this desire to build and preserve family wealth be untaxed when working for a living has to be? Precisely. That same household has already paid tax while working and living

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Cam2910@reddit

>Already top 1% of earners pay 30% of all tax collected. It's only increasing as well. I'd wager the top 1% of earners, earn more than 30% of the total, so proportionally pay less tax tan they should.

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RagerRambo@reddit

You'd have lost your wagger. It's actually 14% of national income. https://ifs.org.uk/publications/characteristics-and-incomes-top-1

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yeahyeahitsmeshhh@reddit

You are describing the process of old wealth getting going. Why should those top earners pay income tax but their children pay no tax on money they didn't earn?

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RagerRambo@reddit

Because the top earner paid the tax (on the earning) so their children don't have to. It's transfer of wealth, not new wealth generated

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yeahyeahitsmeshhh@reddit

It is exactly the same as income for the inheritors though. They are typically middle aged and well off. Except they have done nothing productive. It is so weird that people want to preserve a form of income they won't receive much of from a tax only the rich have to pay.

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RagerRambo@reddit

The picture you paint is one of old wealth hoarding money. That may true, but what about recently acquired wealth, or those that have worked very hard to be in such a position. Already top 1% of earners pay 30% of all tax collected. It's only increasing as well. >Why on earth should this desire to build and preserve family wealth be untaxed when working for a living has to be? Precisely. That same household has already paid tax while working and living

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mupps-l@reddit

It’s under 4% of estates that pay IHT.

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yeahyeahitsmeshhh@reddit

Thanks for the correction.

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PowerfulAssHole@reddit

Well when our taxes are being used to bomb children, it makes me pretttttyyyy annoyed everytime the government takes any money from me. (Just to be clear, I will be getting zero inheritance). Also your argument is "that's just how things are so it's fine" lol.

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yeahyeahitsmeshhh@reddit

Hardly any of your taxes go to bombs and none of our bombs are specifically targeted at children. This is just an excuse to starve the NHS of funds.

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xdlols@reddit

So your issue isn’t taxation but how the government is spending money.

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Redira_@reddit

So is the problem the tax, or how the tax is spent? I happen to agree that tax money being spent to bomb children is a poor use of public money, but that is a separate issue to the necessity of taxation. I'm in an extremely fortunate position to be receiving an inheritance, so I think it's pretty fair that I pay some tax on it.

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imminentmailing463@reddit

>The point is the parents worked to pay for everything, got tax decucted from their earnings and already paid tax on everything they purchased I always find this such a flawed argument. Firstly, they didn't work for a lot of their wealth. Most people who are dying now and have owned a home will have a huge amount of wealth they did nothing to work for. They just got it because government policy caused house prices to go wild. If you want to start basing tax on what they actually worked for, that's not going to end well for those people. Given it was government policy that saw them accumulate such asset wealth, is it not entirely justifiable the government takes some tax? Secondly, the argument they've already paid tax is weak. We are all taxed multiple times, all the time. Every time you pay VAT, council tax, every time you buy fuel, or alcohol, or cigarettes etc etc. If your stance is that being taxed more than once on a bit of money is wrong then fine, but you're not arguing against inheritance tax specifically, you're arguing against the entire tax system.

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LittleSadRufus@reddit

Also if you're legitimately saving for your kids, then put money into an ISA in their name, or fund a property in their name, etc. Must be a nice problem to have tbh.

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Redira_@reddit

From the perspective of the inheritance receiver, how is it any different to any other type of tax by which my hard earned money is subject to? If anything, taxing my income feels worse because I'm actually working for that. I didn't have to lift a finger for my inheritance. An argument could be made about reducing the percentage or increasing the threshold, but a tax on inheritance does make sense. If the owners of the assets (parents) care about the tax being imposed on the estate, then they could always gift the property (though they'd have to live another 7 years so that it isn't subject to the tax).

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RagerRambo@reddit

Sure, tax at source, or tax on transfer, but don't double tax

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Brutal-Gentleman@reddit

Double tax shouldn't be frowned upon. We need to increase taxes to cover increasing costs if an aging population is reasonable to tax the sale of something due the owner no longer owning it and somebody else gaining it. Things would be cheaper if everything was taxed every time, If you couldn't claim vat back, middlemen would be more expensive, leading to cheaper goods and services from people direct.

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RagerRambo@reddit

That's the point. One party (parent) is already losing the asset. If parent and child benefited then yes then they should be taxed again. It's about incentives and motivation. I'm personally not motivated to work above average, sacrifice time, only for tax to continue to increase so I keep less, can pass on less to MY loved ones. Remember, we have a productivity problem here in the UK. It's better in my mind to encourage more people to contribute then continue to tax a slice of thr population increasingly (I'm refering to high earners, low wealth individuals)

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mupps-l@reddit

4% of deaths result in IHT being due. Married couples can pass £1,000,000 tax free to their children. If anything the current threshold is too high. It’s comical how few estates actually pay any IHT.

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RagerRambo@reddit

Marriage is on the decline. We penalise those choosing to stay single or cohabit. In the SE you won't find a home under the £325 threshold, and increasingly for the £1m threshold for the married couple. It's 4% now but that will impact the higher earners of today, in the next few generations

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mupps-l@reddit

£325k threshold is without property. There’s a £175k nil rate band for property so £500k A single person will in all likelihood accumulate less assets why do they need a bigger threshold? Good, 4% is far too low.

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Brutal-Gentleman@reddit

Lifetime wealth is a byproduct of living. It's not the reason people work.

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RagerRambo@reddit

You asked for an example. I gave you one based in reality. The ability to save and enjoy for your retirement is clearly a motivating factor

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mupps-l@reddit

They wouldn’t have paid tax on any property price appreciation. For many that will make up a large part of their estate.

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dw_80@reddit

“Theft” LOL.

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ElectricFlamingo7@reddit

They worked to pay for the house, which then increased in value astronomically due to economic policy, not their hard work, and the massive increase in value has not been taxed. My parents bought their house in 2001 for 50k. That is the amount they *worked hard* for. Its clear worth 250k. They did not *earn* the difference.

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dwair@reddit

Agreed. I have just (unfortunately) been in this position and in all honesty I feel it's fairly fair. I have paid a bit of tax and had a massive boost finantialy. I'm happy to pay high taxes provided we as a nation get a reasonable return for what we pay. What pisses me off way more about tax in general is that huge sums are just pissed up the wall by government and not sent on things that would benefit all of us.

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Thejaybomb@reddit

You’ll be really mad when you find that property that isn’t under a will in areas under the duchy go straight to some royal arsehole. https://duchyofcornwall.org/frequently-asked-questions.html#:~:text=Cornwall's%20Benevolent%20Fund%3F-,The%20Duke%20of%20Cornwall's%20Benevolent%20Fund,to%20The%20Duke%20of%20Cornwall.

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gagagagaNope@reddit

Try earning over £100k They take 15% as employers NI Then another 2% as employees NI Then another 60% as income tax Got kids? They've already taken the child benefit you pay for everybody else Oh, and the tax-free childcare vouchers? They take those as well. If you've 2 kids you need to go from £99.9k to about £137k to keep the same amount of cash. When you save they take 40% of the interest And when you die they take another 40%. Meanwhile 20% of the working age adult workforce have decided working isn't for them, and other people can pay even more tax to keep them fed, clothed and homed.

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Bicolore@reddit

>Then another 60% as income tax The 60% income tax is stupid but its only on the portion of your salary between £100k and ~£125k as you loose your personal allowance.

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gagagagaNope@reddit

a) It is if you have salary sacrifice available. You can't do it later in the year via your tax return, or via a SIPP. And you can't do it once you earn more than that and get into the 45+2% band. b) why should you have to?

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Bicolore@reddit

I'm not denying its not a stupid bit of tax just pointing out that its nowhere near as bad as you imply. UK tax is full of lumps and bumps, not sure any other country is much different.

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gagagagaNope@reddit

It's every bit as bad as I imply. How is a marginal tax rate of well over 100% (once childcare effects are added) not absolutely apalling? You get a promotion, work hard and take home less money because the government take it. Even without childcare, for that £100k-£120k bit. £20k extra put in your pay. The government takes 60% (£12,000) as income tax 2% as Ni - £400 £3000 as employers NI on top. You get: £7600 Government gets: £15400 Employer pays £23,000 to see you £7600 better off. People are envious about this, but these are the people paying for the NHS and public services for everybody else, and they are being punished for doing that. Many are just deciding to work less instead.

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Cam2910@reddit

>They take 15% as employers NI No, they don't. They pay that, not the earner. >Meanwhile 20% of the working age adult workforce have decided working isn't for them Back to the daily mail comment section with you.

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gagagagaNope@reddit

And back to the morning star for you, comrade.

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Cam2910@reddit

Do you actually think 20% of working age people have DECIDED not to work? That's offensively dumb.

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Capheinated@reddit

>Try earning over £100k > >**They take 15% as employers NI** not off of you they don't. the clue is in the word **employers**

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gagagagaNope@reddit

Employers hve a certain amount they can pay you based on output. That 15% is money that would otherwise have been available for your pay packet. They most definitely take it off you.

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Capheinated@reddit

that is absolutely not how tax works or how people think about and discuss costs and taxes. In principle, I understand what you're getting at, but by the same logic you could say that corporation tax could be available for your pay packet if businesses didn't have to pay it. It's technically true... it *could* happen, It absolutely wouldn't, but in theory it could.

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gagagagaNope@reddit

Corporation tax is taking the money off shareholders, not employees.

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Capheinated@reddit

>Corporation tax is taking the money off shareholders, not employees. nope, corporation tax is taken off the business, same as employers NI.

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PixelTeapot@reddit

Stuff needs to be paid for, would you prefer higher taxation while alive to eliminate this OR paying more on death when it's someone else's problem. I'd also make an argument the more kids are able to kick off life on a similar footing the better it is for drive / social mobility / general meritocracy.

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CaradocX@reddit

What needs to be paid for exactly? The NHS that literally eats a million quid every five minutes but is riddled with problems and poor quality care? The Police who refuse to catch criminals? The Legal System that refuses to prosecute criminals? The Border Force that refuses to enforce the Border? The Government that is just about to hand MPs a pay rise to over £90K a year while they destroy the country? The Arts Councils that have just spent over a million quid funding a hard core porn film? Green Energy that is so inefficient that the country is on the verge of catastrophic grid failure? Defence where we spent millions on an aircraft carrier that not only has never worked, but can't even carry planes. Why should Government punish successful people by taking their money and reward people who aren't by handing them that money hand over fist? Taxation is wealth transfer from the successful workers to the incompetent.

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xdlols@reddit

Slay. Let’s just remove income tax and spend nothing.. I’m sure that’ll work.

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CaradocX@reddit

Income Tax is a tax that is less than a hundred years old. How on earth did societies exist for 6,000 years without it?

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I_am_legend-ary@reddit

>Why should Government punish successful people How does having wealthy parents make you a successful person exactly?

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RagerRambo@reddit

Stuff needs paying for, but perhaps we should buy less stuff? Else your argument extends to tax everything at 100% and then spend accordingly. While your ambition is noble to have no wealth passed on and each generation starts on the same footing, it's intrinsically opposed to nature and the human species. We are programmed to have offspring, and give them the best (better) chance at survival and a comfortable life. You disincentive society from generating wealth and working hard if they know that everything they produce will not benefit their children, but someone else

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Ayearinbooks@reddit

My parents have done loads to give me a good life. Inheriting from them on their death if I do will be miles from the main part of it. I'd be interested if there's evidence that people work less hard when there's inheritance tax. If there is it would definitely be a factor but I've never seen it.

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mupps-l@reddit

Given for most what will have dragged their estate over the IHT threshold is untaxed property price increases I would guess you’re right that the current IHT bands don’t dicssentivis work.

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Ayearinbooks@reddit

Yes, that too.

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RagerRambo@reddit

Why not both? Parents can help their children in life and in death. It's not just inheritance tax, it's tax in general. Why do you think the government has been making it more favourable for high earning doctors to put money in their pensions, by increasing pension allowances. Because a large number were retiring early as the more they worked (and they are badly needed in the NHS right now) the more they were penalised. High earners typically have demanding jobs too, so again, you want people to continue to work and thus contribute into the economy

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Ayearinbooks@reddit

Of course they can. But the point is insofar as my desire to work hard in my demanding job is about providing for my kids, it's not primarily about inheritance. As a side note while people working is good for GDP, at a whole system level I'd rather live in a country where as people got older they didn't slave away (and sit in massive houses they don't want or need but intend to pass down) and instead enjoy themselves, spend time with grandkids, volunteer if they want etc.

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Marlboro_tr909@reddit

Inheritance tax is theft.

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CyberGlint@reddit

Why are these downvoted?

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Marlboro_tr909@reddit

Because people tend to be incredibly resentful when it comes to considering what other people have earned and accrued. They want to grab a piece of it

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milkyteapls@reddit

I'll be putting everything in my daughter's name too... Easy way to avoid this kind of tax

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MinorAllele@reddit

the tax-free allowance is huge. And while the parents have paid tax all their lives, your friend is getting a huge amount of assets and then pays a relatively small amount of tax on that. Tax which goes towards peoples pensions, healthcare etc. Also important to mention that tax was never paid on the house increasing in value. Most million quid houses being inherited were not bought for a million quid, they were bought for much much less. It's really not as outrageous as you're making it seem.

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AngelOfLight2@reddit

This can be avoided by setting up a living trust. It's fairly easy and cab be used to avoid taxes completely. Maybe have your friend's family speak to a lawyer, OP. The advantage is that the trust is a separate legal entity, so even if your friend or his family are sued or go bankrupt, the assets within the trust cannot be touched or seized by the authorities as long as it was formed prior to the issue. That essentially protects their future.

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AlmightyRobert@reddit

WTF are you talking about? Yours, somebody who knows a lot about inheritance tax

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AngelOfLight2@reddit

It differs from country to country, bro. If you believe it works differently in the UK, be my guest and share a solution.

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AlmightyRobert@reddit

I mean, this is r/AskUK rather than r/worldwidestuff They’re already dead. There is no solution other than vary the inheritance in favour of a charity.

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AngelOfLight2@reddit

They aren't dead. OP said, "when they die," indicating that at least one parent is still alive.

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AlmightyRobert@reddit

True. I think I was thrown by OP throwing out a tax rate (which is weird in itself). In that case, wot Bicolor said, unless most of the value is tied up in the family home, in which case they may be screwed.

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AngelOfLight2@reddit

Don't most countries exempt the primary family home from property tax calculations? I'm not sure about UK, but most other nations tend to avoid taxing primary residences as they don't generally generate revenue

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AlmightyRobert@reddit

I don’t know about other countries but the UK gives a £175k allowance if a home passes to descendants. That’s £350k for a couple but a nice detached house in the south might easily be a £1m property.

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Bicolore@reddit

Although I don't think the other poster knows what they're talking about inheritance tax is mostly optional in the UK. You just need to plan for it. 7yr gift, excess income gifts, IHT free asset classes etc can all be used to reduce your IHT bill and are relatitvely straight forward.

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wolfwalke@reddit

Its criminal and complete greed

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CyberGlint@reddit

Why are these downvoted?

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wolfwalke@reddit

Not sure, I think some struggle with truths and reality and love their pants being pulled down all their lives

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CyberGlint@reddit

> I think some struggle with truths and reality Denial. Totally is. I see people like this in real life every day.

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CyberGlint@reddit

Agenda 2030 will solve this though.

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Stock_Inspection4444@reddit

There are allowances for giving your house to children, so you get £500,000 tax free then 40% on anything over that. Around 4% of estates end up actually paying any tax, so it’s not that big a deal

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Stock_Inspection4444@reddit

Bare in mind as well you pass on your allowance to a spouse, so for a couple giving to their children, you’re only taxed on anything over £1 million I believe

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BppnfvbanyOnxre@reddit

I doubt my Mum's gaff will go over the limit given she's 93 and it would need to double, still I'd rather she spent her dosh on herself than on making me and my siblings a little wealthier when she does pop off.

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hmmm_thought_pig@reddit

Inheritance tax must have put billions into the coffers when the Queen died.

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BppnfvbanyOnxre@reddit

Jug ears didn't pay a penny when greedy Betty popper her clogs.

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Praetorian_1975@reddit

Except they exempted themselves from the ‘mundane’ peasant problems. A bit like Prince Andrew doing a stretch at his majesty’s pleasure, never gonna happen. But you stay shiny you optimistic diamond you. 😂

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hmmm_thought_pig@reddit

Purely ironic. I just thought we were too sophisticated to require "/s" tags by this stage of the gsme.

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Praetorian_1975@reddit

Ohhh no my friend, Reddit is a fickle mistress

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RabidBadgerFarts@reddit

😂🤣😂🤣😂🤣 yeah I like you're optimism.....

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BppnfvbanyOnxre@reddit

Since they're not royalty or the Duke of Westminster like everyone else the estate is liable if it is over about £1M. Is the estate worth less than £1M if so then they're fine otherwise they could start to mitigate the tax by either gifting now and living or buy considering beneficial trusts.

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AdjectiveNoun111@reddit

>They paid tax on their income their whole lives. They paid tax when they earnt anything, bought anything, and paid tax for interest on their savings. What you're missing is that the value of their assets, especially property, has increased many many times over the course of their lives. The house they bought is probably worth 10-20 times what they paid for it. By comparison of that had been a financial investment they would have had to pay capital gains tax, if it had been a rare antique they found in the attic, they would have paid capital gains tax when they sold it. We can get into the problems with the housing market and ask if these houses are *really* worth such a large amount, but in truth inheritance is a way of cashing in on an investment that 20x over 30 years, so it makes sense to tax that.

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terryjuicelawson@reddit

This is a misunderstanding, they don't just take 47% of everything, there is a hefty allowance. Few actually pay it, and there are ways round it. It is to stop hoarding of generational wealth basically. You should be sorry for the rant as it is proper "bloke down the pub speaks his mind" bollocks.

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Immediate_Fly830@reddit

Yes. Did they work hard to benefit from those ridiculous house price increases? which is the largest proportion of their estate. Bet they had loads of sleepless nights and long hours working to increase its value.

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sihasihasi@reddit

This. My wife and her sister have just lost both their parents. The house sold for just over 300k. It was bought for £12,500.

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Immediate_Fly830@reddit

Exactly. Genuinely really annoys me when people moan about inheritance tax. The threshold is so high that the vast majority of people don't pay it. And even the some that do, it's rarely from capital they've actually accumulated themselves. The vast majority is just getting extremely lucky with ridiculous house price increases. It's also infuriating that the vast majority of people that bemoan inheritance tax are also people who are unlikely to ever be affected by it. But they have this mentality that it MIGHT one day affect them so they have to be vocal about its apparent unfairness. Ridiculous

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mupps-l@reddit

Scrolled for so long to see someone say this and I couldn’t agree more.

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RaymondBumcheese@reddit

He didn’t happen to tell you the numbers involved did he? Because that’s the point you pull the world’s smallest violin out.

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Red_Brummy@reddit

I am glad you were not providing financial advice to your "friend" OP - it's totally not you - as you are very wrong.

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AngryTudor1@reddit

Because we like nice things like public services and universal healthcare. Those things need to be paid for, preferably without making us all poor through sky high taxes. So we tax things like inheritance, which only a tiny fraction of people will ever be affected by and whom will still be getting a huge windfall in any case

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sihasihasi@reddit

>Have I overlooked anything here? Yes. You've overlooked the fact that that's not how inheritance tax works. At all.

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TheCurrentThings@reddit

Aren't there any kind of manoeuvres someone in this kind of position could pull off to swerve this? Couldn't they just gift their assets to their children prior to their death?

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LaidBackLeopard@reddit

At least 7 years before, otherwise it gets tricky.

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non-hyphenated_@reddit

Yes, providing there's 7 or more years between gift & death. Otherwise there's a tax bill

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Lanky_Bag2201@reddit

A lot of posters have laid out the correct facts in terms of when IHT kicks in etc, so I won’t repeat. What I will say is that my mum recently died and had an estate of just under £2m. Part of that was in a private pension and she was under 75 so that cash came to us immediately - within 3 days of us filling in the forms and sending a copy of her death certificate. The rest is her house and cash. The total IHT to pay is about £145k, and whilst it’s galling to have to pay such a higher percentage tax on money my mum earned (and was already taxed on), it is actually a small sum compared to total estate. I can well imagine if she had died at a later age and we were taxed on the whole estate it would really sting at what is already an emotional time. Your parents work hard to leave you this money to look after you in life when they’re not around, and not everyone is educated in estate planning etc.

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Underwritingking@reddit

I think the threshold could be moved a but higher, but TBH it doesn't worry me at all.

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Initial_Split_2505@reddit

Your friend appears to be incorrect on a number of fronts. Everyone gets an £325k allowance, plus an extra £175k if you leave your home to your children/grandchild. So that's £500k. This allowance automatically passes to your spouse on death, so a married couple will have an allowance of £1m tax free. If your total estate is over £2m, this allowance does taper down. With a little planning it's possible to make lifetime gifts of cash etc and have them be IHT free. You can indeed inherit a private pension pot, but it will be subject to income tax dependent on the age of the deceased. Lastly, the rate of IHT is 40% not 47%.

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Suttisan@reddit

The elites have total contempt for the tax paying public, I'm now stuck overseas indefinitely due to changes in uk spouse visas, i need 88k in savings get my spouse there now as my 62k isn't enough to support a partner it seems. Anyway sorry for highjacking your post, there is a lot wrong with how the uk does things, the uk gov punches down relentlessly, it's no wonder so many people are on antidepressants, move elsewhere or end it all.

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Kell_Jon@reddit

Must be a very large inheritance if the net tax rate is 47%

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AlmightyRobert@reddit

Particularly when the top rate is 40%

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28374woolijay@reddit

Tax is due on previous gifts they made, which are included in the value of the estate. For that and various other reasons the effective rate on assets actually remaining at death and available for distribution can be higher than 40%

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Still-Consideration6@reddit

The idea behind inheritance tax is noble but with all things is manipulated. Its wealth redistribution so wealth doesn't supposedly accrue only to the haves. At a point in time some of it passes to the state to support all the things we take for granted army, nhs, state support education etc etc It's easy to avoid give to child before death 7 years spend it etc Much of uk wealth has been accumulated via the happy coincidence of massive property price increases take what you will from that. For the record i inherited 2k

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Independent-Guess-79@reddit

You may have done nothing to earn it but your parents probably worked really hard to give their children opportunities when they passed.

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Happy_Boy_29@reddit

Two things certain in life, death and taxes.

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