/ So what rate should it be set at then?
What is a more interesting question is, what rate should it be and at what point should it kick in?
At the moment according to HMRC it is 40% over £325,000 until 2015.
So someone worth a million dyeing today with no spouse would have to pay £270,000 in tax on their death, charitable donations and shady trust funds aside. The Conservatives a while back wanted to raise the limit to a £1,000,000 thus saving a millionaire £270k+ in tax but had to hold off on their plans as it didn't seem popular among the masses in a time of cuts.
So what do people think? A higher or lower limit or a higher or lower percentage rate above that limit or both?
For me personally I'd want it raised to at least a million and maybe only taxed at £25% from then on. A million pounds in today's world is not actually a lot of money. Yes if all you do in life is grind away in a low level job and never really get far, get a mortgage that's more than you can afford and decide to have a family to soon you'll find you never amass anything close to it but only because they don't live well enough inside their means to accumulate anything over time. It's not that millionaires are mega rich just that the low and average paid employees (of which I'm one by the way) haven't realised how poor they actually are.
Don't forget for a lot of old people today, the cheap house they purchased on a modest salary in unfashionable parts of London back in the 50's and 60's could be worth a million or more on its own, add in some life savings and a few antiques picked up over the decades and the total worth can fly up even if they don't have much money to live on day to day, certainly nowhere near the "millionaire lifestyle". it does seem a bit harsh for their next of kin to have to sell the family home to pay a tax bill.
An intriguing point of view.
I don't have much sympathy for people who whinge, "Woe is me, I'm not inheriting a mansion" when they're still inheriting £730,000* after £270,000 tax has been paid in your example.
*almost thirty times average earnings of fellow tax payers who would have to cough up more if inheritance tax reduced
Ways around anything.
That million pound house is almost certainly 'unearned' in as much as it wasn't paid for in cash, the increase in value is due to nothing much more than 'chance'.
My nephew can't afford to live in the area he, my aunt and my dad's family grew up in. They worked at the local hospital, not The City, were never able to buy a house. I feel much less sorry for millionaires.
Anyone want to through some numbers in as a proposal?
Start at 10 times average wage. Increments of tax in bands up to 70% for £2 million plus
I've never understood inheritance tax - if the beneficiary of a will gets an extra £1,000,000 in cash then that should just be unearned income, declared on your tax return and income tax paid on it. If they inherit a house, capital gains tax should apply to 100% of the houses value when they sell it. I don't see why any special taxes are required.
Since you're asking for a number I say the current 40% over £325,000 looks appropriate or even generous. A tax free windfall of an asset worth £325,000 is much more than most people will inherit and I really don't see why people with less assets should pay more tax so that somebody can get a bigger inheritance.
I don't argue this or any other tax is fair or free of problems, just that it's appropriate in my personal opinion.
Its a minor issue. With the rising cost of care for the elderley most people are going to have to sell their assets anyway.Or you will have given away your money before you die to your close ones.This is what more and mor e people are doing.
A 5% increase for every 100k would be good.
100k = 5%
200k = 10%
1 million = 50%
Anything over 2 million taxed at 100%
This would curb the super wealthy and should lower house prices and it might encourage older people to spend more enjoying themselves rather than hoarding to pass on to the kids.
Should be 0%. Taxes should only levied on income / profit.
But you will have made 100% profit on anything you inherit... Obviously after all the emotional weight that such a scenario encounters.
What riles me is the very wealthy being able to set up Inheritance Tax Exemptions. Basically, keep your mansion and park as it always has been, and you don't have to pay tax on it. So, whereas Inheritance Tax is a way of redistributing the wealth of the 'elite', the ITE negates it. So no redistribution after all. In some cases, it is even possible to use taxpayers money to fulfill the criteria of the ITE. Therefore use taxpayers money to not pay tax.
Talk about a kick in the teeth to all us that are stuck in the PAYE system.
The clue is in the name; inheritance tax!
Why is everyone talking about millionaires and mansions?
What about my in-laws? Worked their arses off for 50 years each, one in an upholstery factory, the other as a nurse - full time, paying tax along the way.
They've got property now and a few assets, probably worth up to 500k - why should they give any of that back when they die?
Because everyone is always keen on the idea that OTHER people should pay more tax, for their benefit.
> A 5% increase for every 100k would be good.
> 100k = 5%
> 200k = 10%
> 1 million = 50%
> Anything over 2 million taxed at 100%
> This would curb the super wealthy and should lower house prices and it might encourage older people to spend more enjoying themselves rather than hoarding to pass on to the kids.
So my in-laws would be paying approximately 24% tax so 100k+ on their assets when they die.
What's wrong with hoarding to pass on to my kids? - It's what I want to do with any extra I might make and it should have absolutely f*ck all to do with anyone else what I do with it.
One of my goals in life is for my daughter to not have to work as hard as we have to.
> Because everyone is always keen on the idea that OTHER people should pay more tax, for their benefit.
Yep - that and some petty jealousy I think.
Once again it's the grafters who get hammered.
> Should be 0%. Taxes should only levied on income / profit.
Why? Is there some universally agreed law of God or nature that says so?
I think the current threshold is about right. Maybe the rate could be a bit lower though. With a lower rate, it might be less tempting to pay expensive accountants to set you up with a loophole.
Not sure if it should be paid per estate or per recipient though. If the estate is all passing to one person hould that be the same as if it passes to six?
also, this isn't a big earner for the government, they get more from the TV licence.
> So my in-laws would be paying approximately 24% tax so 100k+ on their assets when they die.
No they would not, you would be paying it on the 500k of un earned income that you have been given (working on you being the 100% beneficiary for the sake of argument).
You are a bit off with the 100k too.
5% of the first 100 is 5k
10% of the second hundered is 10k
15% of the third hundred is 15k
20% of the fourth hundered is 20k
25% of the fifth hundered is 25k
add all that up and you get 85k, I dont think 85k in tax leaving you with 415k is bad.
No one likes paying tax but at least a sliding scale helps the less well off a bit.
Maybe 5% per 100k is too much, maybe make it 2% and/or start the scale after 200 or 300k
Life's not fair, get used to it.
Good post ! I also believe we should all pay the same amount of tax too - ie a flat rate.
> Life's not fair, get used to it.
> I dont think 85k in tax leaving you with 415k is bad.
I do. Especially as I've been paying tax an everything else for x number of years anyway.
> What riles me is the very wealthy being able to set up Inheritance Tax Exemptions. [...] So, whereas Inheritance Tax is a way of redistributing the wealth of the 'elite', the ITE negates it. So no redistribution after all. [...]
> Talk about a kick in the teeth to all us that are stuck in the PAYE system.
Could you please explain to me why redistribution of wealth is a good thing?
You aren't 'stuck' with PAYE - you are free to become self employed.
The idea of setting tax rates according to "fairness", rather than practicality falls down on several points. First "fair", like beauty, is entirely in the eye of the beholder, normally it translates as "someone other than me should pay lots more tax", secondly it lends itself to ever more complicated tweaks and quirks being introduced into the tax system. The fairists then get very annoyed when much clever people than them then use these quirks entirely legally but entirely to their own advantage, to dramatically reduce the amount of tax they are subject to. The response of the fairists is then to introduce even more complicated rules to punish these "abuses", that they introduced in the first place, which meet with the same response, in a self-reinforcing cycle.
It never occurs to those who scream for fairness that the cure for the disease is not more of the same actions that caused it in the first place, and that simple tax systems are harder to avoid and manipulate than very elaborate ones introduced under the banner of being "fair". This is especially true where politicians are involved in using public money (normally non-existent money), to buy votes on a temporary basis that produces massive costs and is incredibly hard to remove or reform on a long term basis. Gordon Brown was of course notorious for this, with an endless lists of goodies to his favoured groups, baby bonds, EMA and of course the incessant, fantastically complex and cripplingly expensive list of bribes for parents. These bribes are invariably very easy to introduce (even if quite hard to introduce in a way that works remotely competently), but very hard to remove, as the bribed group screams as though the removal of an unjustified privilege is the equivalent of being packed into cattle trucks and sent to a labour camp. Witness the howls of indignation at child benefit being removed from those already earning £50k!!
Another point that never seems to be considered by those screaming "fair" is that apart from it being more sensible to have a cheap, simple tax system that is hard to avoid, if one were genuinely attempting to construct a tax system based on fairness, the amount that individuals COST the state would be a very important criteria, especially where that cost is due to their own foolish or reckless actions, rather than some unfortunate fate. In other words, fairness is as much about inputs as outputs.
Trusts for the children, pensions for the children, company owns the family house as well as other property etc are all ways we are using to get round it. Sadly holding assets offshore is evermore risky so now avoided. Inheritance tax gets only the people who don't plan for it.
NB Particularly impressed with pensions. We pay £3600 into each child's stakeholder per anum, which is tax exempt and the government pays 20% of it too. With even a modest compound interest this becomes £1m each by 65 yrs of age.
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