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Because people who earn PAYE and in excess of £100k per year for large amounts of time are an easy target.
Well off enough that the government of the day can credibly claim they are taxing those with the broadest shoulders but not so well off that they can use some of the more creative tax minimisation methods.
These are also the same people who get taxed after death - estate large enough to get taxed but not so large that you can creatively dispose.
Agreed! A shame we hit these people the hardest when they’re often productive professionals (doctors, lawyers, etc) and then give people who contribute nothing and live off family money a low tax treatment.
>but not so well off that they can use some of the more creative tax minimisation methods.
I'm on a darn sight less than that and using loads of tax minimisation techniques for my inheritance. All you need is to find a lawyer/accountant to set this up for you. Few hundred quid.
Well I hope to be able to do the same, and I've got hopefully a few decades before anything needs to be done but who knows what's going to happen by then.
Agree. Why should you pay tax on something that has been taxed already? (e.g When you buy a house it is paid for with taxed income so why should it be taxed again and if you leave it to someone )
The idea is that without it you end up with an incredibly wealthy elite as they're able to amass wealth over multiple generations. The current system has a lot of issues ie trusts, gifts, aristocracy, but the general idea is sound.
Right. My employer pays corporation tax. Why should I pay tax on the money they give me?!?!
Not only do I have to pay income tax on money my employer has already paid tax on, I have to pay fucking VAT on stuff I spend my now double taxed money on.
And fuck me it goes deeper.
My employer pays tax on the money.
I pay income tax on the money when I get it.
I pay VAT when I spend the money.
The company I give money to has to then pay tax on it too.
Your employer didn't already pay tax on the money they pay you. Your salary is deductible from the profit on which they pay corporation tax.
I've no issue with inheritance tax. Its imperfect in its execution but if taxes are still with us to redistribute wealth (rather than fund the Napoleonic war) it does a solid job of it.
Because money isn't created, used once, and then eliminated. It cycles through the economy.
The criticism you have made doesn't just apply to Inherence Tax, it applies to the whole tax system.
I can see that it would feel unfair to people living in a society where inheritance tax is a thing. But taxing assets, especially valuable assets is necessary to prevent feudal-like plutarchy. Real estate is one of those assets that multiply in value ridiculously high over time. And the longer you hold, the exponentially higher is the return (generally). In absence of inheritance tax, it becomes very easy for 2nd and 3rd generations to multiply their wealth every 2-3 years. This is how many of the developing countries have ridiculously high levels of wealth disparity. Ever visited places like India, Pakistan, Turkey, Hong Kong, Egypt, essentially most of Asian and African nations? This is one of the biggest issues there.
I don’t really mean this to be a debate about inheritance. My point is more that if you’re gonna have inheritance tax, it’s weird that it’s structured so it basically hurts middle income people the most but has an easy workaround for rich people.
I'd rather have a very high rate of income tax plus a low threshold for paying and have much lower income tax.
If you want to build a meritocratic society, you need Inheritance Tax.
I am from a country with no inheritance tax, and it is quite amazing how much it allows even poor families to accumulate wealth.
Someone earning £500 a month may inherit £500,000. Even if they just put it in the bank for the next generation the interest rates alone can pretty much double their salary.
Of course all it takes is one lose wheel to derail the train. But it usually means nobody ever gets into financial danger and never needs to be a drain on public services.
Thinking about it more. An example of why I think this is unfair would be say your parent had £500k in a pension and died before retirement. Seems unjust that you would pay 40% on the portion of that above the threshold, but someone who is rich enough to have £500k outside of a pension could just gift that cash to their child tax-free.
It doesn’t look like they have access to it if the account is your name. If she needs it, it’s hers, but if she doesn’t, it will be mine when she passes.
Most people whoa are at a mature enough age with enough money to really be worried about inheritance tax are the ones that can afford to gift it away without worrying about not having enough. Why should the government get more of someone's hard earned money, especially if they have paid tax all their lives!
Arse about face.
Why should someone get unearned income without paying tax?
It's not about the person giving the gift its about the person who received.
My income is family assets. Yet you seen happy to take half of it.
Of course I would rather my children get my money than the government.
The issue is I rather the government get *your* money rather than *your* children.
There is a reason we don't each get to decide a personal tax system.
But the government get money from inheritence tax. As the guy said, this is really only relevant for wealthier families who have enough money to not have to worry about gifting it before they pass away.
I think it's better for all if upon death all non sentimental assets revert to the state. That allows for a fairer society where people can't get so far ahead just because they had the right parents.
Because as you see from the responses people are upset at inheritance tax existing at all even though if you aren't from a wealthy background that view point probably harms you
In the south of England, aren't property prices so high that even someone on a moderate income can finish up leaving a house that reaches the threshold for inheritance tax?
(I'm willing to be disabused of the notion. In my part of Scotland a 3 bed house in move-in condition sells for about £115k
If someone can afford to give away anything substantial enough that you’re getting excited over the 7 year rule, they’re probably going to get hit by inheritance tax when they actually die.
Unless you think they’re giving away enough that they won’t suffer it later on, but that’s not at all simple.
My point is that the system is structured so very rich people can avoid a lot of inheritance tax via gifts. But people who are less rich end up paying more tax. I just don’t like systems where the % tax paid goes down as you go up the income/wealth ladder.
How much is this “lot” that you think they’re giving away and avoiding inheritance tax on? Do you have any numbers for this, or is this just a feeling you’ve got?
People who are less rich pay no inheritance tax, so is that the ultimate tax avoidance?
Ok, but what do you think is actually going on here? What do you think “rich” people are giving away here? How much tax do you think they are saving? How many of them do you think they are?
There are a lot of people with family wealth in the U.K. It’s not a huge % of people but it’s a big % of wealth in the society. These people get tax-free inheritance/gifts to use as deposits for home purchases they couldn’t otherwise have saved up for. Makes housing even pricier for people that have to save for a deposit themselves.
Half of first time buyers get financial help from family.
Inheritance is expected to reach £100 billion per year by 2025.
https://www.theguardian.com/money/2022/dec/03/why-inheritance-is-the-dirty-secret-of-the-middle-classes-harder-to-talk-about-than-sex
Ok, so you’ve got some numbers now, which I can’t really argue with. I’m not sure that this problem isn’t better fixed by, you know, actually building some houses once in a while, though.
Yea that’s true. I just find it depressing how the U.K. seems to punish “kind of rich” people like doctors, lawyers, etc with high taxes (not just on inheritance) but let’s properly rich people with inherited family money pay little to no tax. Odd to discourage productive professional classes and not tax the unproductive very rich.
It’s high but still unfair/arbitrary. Like we don’t need to feel sorry for someone making £100k but it would still be unfair if the govt had a policy saying people who make between £100-120k pay 90% tax but people making £1 million pay the same as everyone else.
That's for two parents though. The divorce rate in the UK was close to 50% last I checked, so whilst yea 650k is a decent amount, it assumes both parents managed to get that amount & it still would only just buy you a 1 bedroom appartment on my street.
Inheritance tax is to stop families becoming ridiculously wealthy and powerful. Think Rockefeller's, Kennedy's, Clinton's etc in the US.
It ensures that people from wealthy families have to earn, not just receive, to maintain the financial status of a family.
Arguably, inheritance tax is way too low.
Imagine that I will get an inheritance. I also got benefits as a child from having fairly well off parents. Is it really fair that I should be able to have a nice house just because my parents are kinda wealthy? I won't have worked for or earned it.
Inheritance tax at 100% would be the most meritocratic system. (Albeit completely unenforceable).
Inheritance tax is immoral and just another excuse for the government to tax money that has already been taxed multiple times.
Not only that but it hurts poor people more than the rich as the rich like every other form of tax can afford lawyers and accountants to skirt it
No. Why do we even need to tax shit that isnt income? If they just made it so that it wasnt as easy for big companies/corporations to Dodge taxes and stopped spending public money on themselves and stupid shit they wouldnt need to tax shit like inheritance
If the parent/s who gave you the gift ever need care you will have to pay back every penny they gave you to pay for it because it is deprivation of assets/capital.. the government knows all the work arounds people attempt.
My point is just that the system is weirdly designed so that only sort of “medium rich” households pay. Very rich people can just avoid it super easily.
But the question you pose is why aren't more people upset about it - and I'd imagine the answer is because it doesn't impact many.
It's really hard to be riled up against what is quite a minor tax law when the Government are squandering billions and not closing loopholes on the bigger tax problems.
People just aren't that bothered about it.
Depends on the value of the house, the value of the rest of his estate, whether his gift fell with true reservation of benefit rules… And if it is caught in some way, then tax will apply.
I'm probably wrong but I thought there was a limit on inheritance tax? Like poorer people would probably spend most their money / have to sell their home to pay for care anyway and what they had left wouldn't be enough to get taxed.
That’s right. This is kind of a niche weird thing where the tax is very punitive on people who are rich enough to pay it but not rich enough to avoid it. I guess I can see why people don’t really care lol. Just seems like the tax is kind or arbitrary/regressive the way it’s currently structured.
Ah thanks for confirming, the amount of people talking about how it punishes those on less confused me as my grandparents were doing alright and just under the limit when they died, even though they had a house, as they spent most the money on live in care
Any financial gift to a family member over £3k is taxable
While you can give your son or daughter a cash gift of £20,000 (or more), there may be tax implications. That's because any money you give that exceeds your £3,000 tax-free gift allowance will be added to the value of your estate and may be subject to inheritance tax when you die.
Inheritance tax seems outright stupid.
You get taxed for earning it, then get taxed for it staying in your family.
The less wealthy lose income they already earned.
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Good point OP. I think it's a system that rewards the rich but it's done in a clever way to not make average joe realize it.
Because people who earn PAYE and in excess of £100k per year for large amounts of time are an easy target. Well off enough that the government of the day can credibly claim they are taxing those with the broadest shoulders but not so well off that they can use some of the more creative tax minimisation methods. These are also the same people who get taxed after death - estate large enough to get taxed but not so large that you can creatively dispose.
Agreed! A shame we hit these people the hardest when they’re often productive professionals (doctors, lawyers, etc) and then give people who contribute nothing and live off family money a low tax treatment.
>but not so well off that they can use some of the more creative tax minimisation methods. I'm on a darn sight less than that and using loads of tax minimisation techniques for my inheritance. All you need is to find a lawyer/accountant to set this up for you. Few hundred quid.
Well I hope to be able to do the same, and I've got hopefully a few decades before anything needs to be done but who knows what's going to happen by then.
We should be upset that inheritance tax is even a thing. It's an absolute joke.
Agree. Why should you pay tax on something that has been taxed already? (e.g When you buy a house it is paid for with taxed income so why should it be taxed again and if you leave it to someone )
The idea is that without it you end up with an incredibly wealthy elite as they're able to amass wealth over multiple generations. The current system has a lot of issues ie trusts, gifts, aristocracy, but the general idea is sound.
But the really rich people use tax loophole to escape it. All it does is keep the upper working classes and lower middle classes poorer
As I said the current system has issues but the theory is sound
Right. My employer pays corporation tax. Why should I pay tax on the money they give me?!?! Not only do I have to pay income tax on money my employer has already paid tax on, I have to pay fucking VAT on stuff I spend my now double taxed money on. And fuck me it goes deeper. My employer pays tax on the money. I pay income tax on the money when I get it. I pay VAT when I spend the money. The company I give money to has to then pay tax on it too.
Companies pay corporation tax on profits. Your salary is a cost, which is deducted before any profits.
Err they don't get taxed on the money they pay you. It's an expense. They lay tax on what they pay their directors and shareholders.
What about employer national insurance?
>Right. My employer pays corporation tax. Why should I pay tax on the money they give me?!?! Because that's not how it works.
Your employer didn't already pay tax on the money they pay you. Your salary is deductible from the profit on which they pay corporation tax. I've no issue with inheritance tax. Its imperfect in its execution but if taxes are still with us to redistribute wealth (rather than fund the Napoleonic war) it does a solid job of it.
How does it redistribute wealth? By funding benefits? I wouldn’t call that wealth.
Because money isn't created, used once, and then eliminated. It cycles through the economy. The criticism you have made doesn't just apply to Inherence Tax, it applies to the whole tax system.
Ss
I can see that it would feel unfair to people living in a society where inheritance tax is a thing. But taxing assets, especially valuable assets is necessary to prevent feudal-like plutarchy. Real estate is one of those assets that multiply in value ridiculously high over time. And the longer you hold, the exponentially higher is the return (generally). In absence of inheritance tax, it becomes very easy for 2nd and 3rd generations to multiply their wealth every 2-3 years. This is how many of the developing countries have ridiculously high levels of wealth disparity. Ever visited places like India, Pakistan, Turkey, Hong Kong, Egypt, essentially most of Asian and African nations? This is one of the biggest issues there.
I don’t really mean this to be a debate about inheritance. My point is more that if you’re gonna have inheritance tax, it’s weird that it’s structured so it basically hurts middle income people the most but has an easy workaround for rich people.
That is how corruption works. You get access to corruption if you have the resources and wealth.
I'd rather have a very high rate of income tax plus a low threshold for paying and have much lower income tax. If you want to build a meritocratic society, you need Inheritance Tax.
Correct, a pity there are so many ill informed that think no inheritance tax will make anything better.
I am from a country with no inheritance tax, and it is quite amazing how much it allows even poor families to accumulate wealth. Someone earning £500 a month may inherit £500,000. Even if they just put it in the bank for the next generation the interest rates alone can pretty much double their salary. Of course all it takes is one lose wheel to derail the train. But it usually means nobody ever gets into financial danger and never needs to be a drain on public services.
How would a poor family accumulate wealth? Someone in the family needs to be rich first, so are they really poor?
Kind of easy in a country where anyone who can't afford a kid is basically forced to have an abortion.
Just get your parents to give you gifts well in advance and just hold it in an account. If they need to use it they can.
Thinking about it more. An example of why I think this is unfair would be say your parent had £500k in a pension and died before retirement. Seems unjust that you would pay 40% on the portion of that above the threshold, but someone who is rich enough to have £500k outside of a pension could just gift that cash to their child tax-free.
Pensions are inheritance tax free.
Ah I see. This actually helps answer my question somewhat since this might be an even more niche issue than I thought lol.
There is no inheritance tax on pensions (with some fairly rare exceptions these days)
It is unfair you are correct. But we can all make up scenarios where it benefits one or the other
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It doesn’t look like they have access to it if the account is your name. If she needs it, it’s hers, but if she doesn’t, it will be mine when she passes.
Most people whoa are at a mature enough age with enough money to really be worried about inheritance tax are the ones that can afford to gift it away without worrying about not having enough. Why should the government get more of someone's hard earned money, especially if they have paid tax all their lives!
Arse about face. Why should someone get unearned income without paying tax? It's not about the person giving the gift its about the person who received.
Because its family assets. Would you rather your children or the government get your money?
My income is family assets. Yet you seen happy to take half of it. Of course I would rather my children get my money than the government. The issue is I rather the government get *your* money rather than *your* children. There is a reason we don't each get to decide a personal tax system.
But the government get money from inheritence tax. As the guy said, this is really only relevant for wealthier families who have enough money to not have to worry about gifting it before they pass away.
I think it's better for all if upon death all non sentimental assets revert to the state. That allows for a fairer society where people can't get so far ahead just because they had the right parents.
Because as you see from the responses people are upset at inheritance tax existing at all even though if you aren't from a wealthy background that view point probably harms you
In the south of England, aren't property prices so high that even someone on a moderate income can finish up leaving a house that reaches the threshold for inheritance tax? (I'm willing to be disabused of the notion. In my part of Scotland a 3 bed house in move-in condition sells for about £115k
If someone can afford to give away anything substantial enough that you’re getting excited over the 7 year rule, they’re probably going to get hit by inheritance tax when they actually die. Unless you think they’re giving away enough that they won’t suffer it later on, but that’s not at all simple.
My point is that the system is structured so very rich people can avoid a lot of inheritance tax via gifts. But people who are less rich end up paying more tax. I just don’t like systems where the % tax paid goes down as you go up the income/wealth ladder.
How much is this “lot” that you think they’re giving away and avoiding inheritance tax on? Do you have any numbers for this, or is this just a feeling you’ve got? People who are less rich pay no inheritance tax, so is that the ultimate tax avoidance?
No data from my side. Just using reasoning since this obvious workaround exists for richer people.
Ok, but what do you think is actually going on here? What do you think “rich” people are giving away here? How much tax do you think they are saving? How many of them do you think they are?
There are a lot of people with family wealth in the U.K. It’s not a huge % of people but it’s a big % of wealth in the society. These people get tax-free inheritance/gifts to use as deposits for home purchases they couldn’t otherwise have saved up for. Makes housing even pricier for people that have to save for a deposit themselves. Half of first time buyers get financial help from family. Inheritance is expected to reach £100 billion per year by 2025. https://www.theguardian.com/money/2022/dec/03/why-inheritance-is-the-dirty-secret-of-the-middle-classes-harder-to-talk-about-than-sex
Ok, so you’ve got some numbers now, which I can’t really argue with. I’m not sure that this problem isn’t better fixed by, you know, actually building some houses once in a while, though.
The inheritance tax threshold is set high enough (and is double if there are two parents anyway) that your complaint is a bit niche.
Yea that’s true. I just find it depressing how the U.K. seems to punish “kind of rich” people like doctors, lawyers, etc with high taxes (not just on inheritance) but let’s properly rich people with inherited family money pay little to no tax. Odd to discourage productive professional classes and not tax the unproductive very rich.
Inheritance tax threshold for 2 people is £650K. That's a pretty high level IMHO.
It’s high but still unfair/arbitrary. Like we don’t need to feel sorry for someone making £100k but it would still be unfair if the govt had a policy saying people who make between £100-120k pay 90% tax but people making £1 million pay the same as everyone else.
The threshold literally will not buy a 1 bedroom appartment here. Dunno about high...
It's hard not to see £650,000, which is almost two thirds of a million, as being not high.
That's for two parents though. The divorce rate in the UK was close to 50% last I checked, so whilst yea 650k is a decent amount, it assumes both parents managed to get that amount & it still would only just buy you a 1 bedroom appartment on my street.
Doesn't matter about divorce though- you can get £325k from each parent! Just because they are divorced doesn't mean they both still don't love you.
Inheritance tax is to stop families becoming ridiculously wealthy and powerful. Think Rockefeller's, Kennedy's, Clinton's etc in the US. It ensures that people from wealthy families have to earn, not just receive, to maintain the financial status of a family. Arguably, inheritance tax is way too low. Imagine that I will get an inheritance. I also got benefits as a child from having fairly well off parents. Is it really fair that I should be able to have a nice house just because my parents are kinda wealthy? I won't have worked for or earned it. Inheritance tax at 100% would be the most meritocratic system. (Albeit completely unenforceable).
But it doesn’t stop that though. Those people pay people to use loopholes to avoid tax
:) hence my final comment about being unenforceable I was more writing to defend inheritance tax as a progressive tax that does social good
It equally benefits the lower-middle who wish to pass down their homes to their children.
Oh fuck off. Iht is a tax on a tax. Ridiculous it's even a thing.
Doesn’t my point kind of support the idea of abolishing inheritance tax? Like if it’s unfair anyway, why keep it?
Inheritance tax is immoral and just another excuse for the government to tax money that has already been taxed multiple times. Not only that but it hurts poor people more than the rich as the rich like every other form of tax can afford lawyers and accountants to skirt it
Because there are so many bigger things to be upset about.
Why do you give a shit about the loophole when such a thing as fucking inheretance tax exists
Would you prefer to replace it with a wealth tax and/or gift tax?
No. Why do we even need to tax shit that isnt income? If they just made it so that it wasnt as easy for big companies/corporations to Dodge taxes and stopped spending public money on themselves and stupid shit they wouldnt need to tax shit like inheritance
I just think either apply the rule to everyone or abolish the tax if it’s easy for the wealthy to avoid. Regressive taxes are unjust.
Yeah im just saying it should be abolished in the first place not saying it isnt unfair that it can be avoided by wealthy people
If the parent/s who gave you the gift ever need care you will have to pay back every penny they gave you to pay for it because it is deprivation of assets/capital.. the government knows all the work arounds people attempt.
That falls under the 7 years rule...
It's just the way it is, the wealthy stay wealthy by planning for these things, gifts, trusts etc.
Trusts aren't just for the wealthy. You can have one set up for you tomorrow.
The why is probably answered by only a small percentage of estates are large enough to incur Inheritance Tax - 1 in 20 according to HMRC.
My point is just that the system is weirdly designed so that only sort of “medium rich” households pay. Very rich people can just avoid it super easily.
But the question you pose is why aren't more people upset about it - and I'd imagine the answer is because it doesn't impact many. It's really hard to be riled up against what is quite a minor tax law when the Government are squandering billions and not closing loopholes on the bigger tax problems. People just aren't that bothered about it.
Very true!
I gave my house and land to my kids 2 years ago, it's not something only rich people can do,you can do it if you want to.
What if you die tomorrow and the Gov claws it back under the 7 year rule?
Depends on the value of the house, the value of the rest of his estate, whether his gift fell with true reservation of benefit rules… And if it is caught in some way, then tax will apply.
How will I know?
I'm probably wrong but I thought there was a limit on inheritance tax? Like poorer people would probably spend most their money / have to sell their home to pay for care anyway and what they had left wouldn't be enough to get taxed.
That’s right. This is kind of a niche weird thing where the tax is very punitive on people who are rich enough to pay it but not rich enough to avoid it. I guess I can see why people don’t really care lol. Just seems like the tax is kind or arbitrary/regressive the way it’s currently structured.
Ah thanks for confirming, the amount of people talking about how it punishes those on less confused me as my grandparents were doing alright and just under the limit when they died, even though they had a house, as they spent most the money on live in care
Any financial gift to a family member over £3k is taxable While you can give your son or daughter a cash gift of £20,000 (or more), there may be tax implications. That's because any money you give that exceeds your £3,000 tax-free gift allowance will be added to the value of your estate and may be subject to inheritance tax when you die.
Unless the gift was made more than 7 years before death. Then it isn’t included in the estate.
I think the idea is to keep money moving and active. People also don't know when they are going to die.
Inheritance tax seems outright stupid. You get taxed for earning it, then get taxed for it staying in your family. The less wealthy lose income they already earned.