IHT and the ED family

[Alan Dale]

Every family home in ED is worth in excess of ?300,000 and will therefore be liable for IHT in someone's death estate. That means that when you die your kids will have to find significant capital sums to pay the tax bill so that they can continue to live in the family home.

Would I be right in assuming that the ED forum is right behind John Redwood's proposals to ditch inheritance tax?

http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=475810&in_page_id=1770

[SimonM]

>>Would I be right in assuming that the ED forum is right behind John Redwood's proposals to ditch inheritance tax?<<

No!!!!!!!!!!! :X

[nutty]

I think I might be and was going to read the article, then I saw where it was from...

[Administrator]

Just to clarify that the forum as a whole has no political affiliations and does not involve itself with political discussion. The initial question should be "...assuming that the users of the ED forum are right behind...".

[*Bob*]

This would involve voting Conservative. I think not.

As I'm sure most people are aware, there are simple, legal ways for the average over-the-threshold homeowner to avoid paying inheritance tax anyway. So essentially, at the moment (and unfortunately for many) what we have is a law which penalises the less well-informed.

[*Bob*]

Maybe not the ideal subject for Friday 6pm on a warm(ish) summer evening.

[lozzyloz]

I can't think of any of my friends under the age of 25 that still live at home. In fact most of them would welcome the idea of their parents "moving on" so that they could sell the house less IHT and enjoy spending it whilst they're still young enough (assuming they were written into the will). The people that this will effect the most is the very wealthy. You'll probably get more support in the Village than ED. Another desperate Tory gimmick.

[Ladygooner]

I think I am right in saying if the parents gift the house to the kids 7 years before they die, there is no inheritance tax

[tommy]

Right Ladygooner (and as an aside I must say the young side is doing pretty well so far this season) - but if the parents continue to live there during the 7 years that brings up another lot of issues

[Bellenden Belle]

"penalises the less well informed"

"the people this will effect the most is the wealthy"

As someone who has paid IHT on my mother's estate I would just like to point out the inaccuracies of these two statements.

IHT doesn't necessarily penalise the less well informed - unfortunately when cancer came knocking my mother simply wasn't in a position to say "Hang on a moment Grim Reaper I just need to get my finances in order". She was barely past retirement age - she wasn't at an age when she would consider downsizing and spending her money - she literally thought she had years ahead of her. She was caught out not through ignorance, but through cancer - hardly fair, is it?

We weren't a rich family. My parents were both very sensible savers - father a greengrocer, mother an irish immigrant who left school at 16 but worked hard and did well, particularly when left as a single mother when my father died. We lived in a modest house in unexciting Southgate. Hardly the landed gentry.

My mother was devastated when she realised her savings were going to go to the tax man and there was nothing she could do. As far as she could see all the sacrifices she had made - not having holidays; not spending a fortune on meals out, not having new clothes - all those small things which her generation had been brought up to believe was worth it for security - amounted to a bill for Gordon Brown. What did she want most at that final point in her life? To leave knowing that I was secure and settled .

Am I a rich brat bemoaning my tax bill? I hope not - I would rather have parents here today than a nice house in Peckham Rye (truth is I still couldn't afford East Dulwich and I still have a larger mortgage than my parents ever had). Do I believe in inheritance tax - possibly, even still - but not when the threshold is the equivalent of a 3 bed house in Southgate or a two bed flat in East Dulwich. Affecting the rich? I think not. The less well informed? No - just the unfortunate.

[Huguenot]

Solid observations BB.

Tax should be associated with tasks that draw down on hidden costs involved in sustaining social structure - hence I have no problem with income tax, VAT, road tax etc. etc.

Inheritance tax has no place in a modern society, it is a penalty imposed on a successful life and is a poor motivator for investment in our own futures.

However,one can stick one's John Redwood right up one's harris.

[macroban]

> Tax should be associated with tasks that draw down on hidden costs involved in sustaining social structure - hence I have no problem with income tax, VAT, road tax etc. etc.

That's OK then.

Inheritance Tax (as it is now branded) was introduced in 1796 to help pay for the war against Napoleon.

[*Bob*]

BB

Fair enough.. it's a tax which penalises the less informed and those subject to unforseeable changes in family circumstances.

Either way I think it's wrong.

[lozzyloz]

All taxes are a neccesary evil (or penalty these days if you drive a 4x4 or have a successful career). The way they are formulated dictates their fairness or unfairness and I guess that depends largely on how we vote in governments (please not Redwood). As we're all in different circumstances, some will be more heavily taxed than others. There will always be losers and less losers as well as tragic cases like the two old sisters that share the same home but can not afford to pay duties should one of them die. The main problem I have with IHT is the threshold which should probably be closer to ?500k or more.

[citizenED]

I suppose I might have to face this one down, but as far as I can see, tax is simply my contribution to the running and wellbeing of the country in which I live. It seems wrong to see it as an evil. It has become common to hear people in the media say such things as, "everybody hates paying taxes" as though it is some sort of given. I for one do not begrudge paying taxes - in fact i am rather proud of the fact that I do.

citizen

[SeanMacGabhann]

Oooh citizen I could give you a big hug!

I have to say first that I thought Bellenden Belle's post was very articulate and moving at the same time. And I agree with much of what was said. Ditto Hueguenot and other's on the unfairness of IHT

Crude and unfair tho it is however, IHT is one of the very few brakes on house prices these days - if it were to be raised or even abolished then many of the deals being done on the threshold would disappear and prices move upwards even faster (notwithstanding today's apparent news that house prices in London have fallen slightly)

[Alan Dale]

SeanMacGabhann Wrote:

-------------------------------------------------------

> many of the deals being done on the threshold

> would disappear and prices move upwards even

> faster

Are you sure you're not confusing IHT with stamp duty?

There is no sense in trying to buy a house for under the IHT threshold as the IHT payable is based on the market value of the property on death.

[*Bob*]

It's the application of the IHT law which is an arse, not the law itself. I mean, a tax is a tax.. the government has to get money somehow. Take IHT out of the equation and someone else would be making-up the difference somewhere else.

How can the application of IHT be fair. Person X knows if he takes certain steps at a certain time, his heirs won't have to pay a bean. Person Y knows this as well, but dies unexpectedly before he can take those steps so it has to be paid. Person Z doesn't have a clue so the tax is paid - then his son finds-out in the pub a year later that he could have avoided it.

It's ridiculous. What if everyone had to pay Income Tax.. except those who knew that if they congregated in the car park of Tesco at midnight on 5th April and did the hokey cokey - once a year - then they would be exempt from paying it 7 years from then. It's that stoopid.

[SeanMacGabhann]

Do you know, Alan, you are spot on

Funny five minutes there - thanks for the spot!

[Alan Dale]

Stamp duty is another stupid tax. The number of sales that happen just below the threshold clearly show that the tax is distorting the market.

I agree with *Bob*. It's the complex structure of the taxes that make them so ridiculous.

I would not like to see our tax burden reduced I would just like to see everything simplified.

It is important to also realise that raising the rate of a tax doesn't necessarily increase the revenue collected.

[AB]

I never understand what's so unfair about IHT.

Firstly, to address one of the points raised in the thread, the same information is available to everyone - it's not a secret tax that only some people are allowed to know about in advance. In addition, it's actually very difficult to plan well for inheritance tax - it comes down to giving money away seven years in advance of the day you die, if you know what day that is (except for a few exceptions which allow you to give stuff away for birthdays and weddings, etc).

But more importantly, all tax goes into the same tax pot and you have to fill that pot from somewhere. It's far more ethical to tax someone who has just died (and therefore it doesn't matter to them) than to increase tax on income that people work for and depend on.

Agreed that you need some arbitration when it means someone will lose their home, for example. I wouldn't claim to know how to administer that fairly.

[*Bob*]

AB: If the same information is available to everyone, then how come so many people don't know about it?

[Alan Dale]

I don't think IHT is unfair in principle but rather in application. As you say it is paid by dead people and if well applied it would prevent the perpetuation of privilege and inequality but as it is most really rich people do not pay it.

Gifting and waiting 7 years is the most crude for of avoidance. There are many more sophisticated forms such as placing assets into trust, passing on businesses, farms and other exempt business assets or using insurance policies that pay into trust but as this information is available to everyone then I'm sure you know all about it.

The end result is that it is a tax on a certain section of the population who own their own home, with a value in excess of the threshold, which they need to live in and therefore cannot give away in advance.

This is the typical situation for an East Dulwich based family and that is why I thought the Forum would support John Redwood's call for it to be scrapped but as has been pointed out the forum has no opinion of its own and merely provides a place for forumites to express their opinions.

That's a shame as I think a united forum would posses a powerful lobby.

[AB]

Well the information is certainly available - http://www.hmrc.gov.uk/cto/iht.htm. Maybe they should teach personal finances in school? But it's on the front page of the Mail most weeks so surely people know that it exists and that it's a tax you pay when you die.

[Alan Dale]

There are thousands of legitimate avoidance schemes that are not listed in your link.