I feel out of step with all this talk about inheritance tax. I have never seen it as a ‘tax on death’. That is just an emotive label pushed by the newspapers and Tories as far as I can see. If anything it is a windfall tax on the inheritors.
As it happens I do think it is unfair, but not for the same reasons everyone else gives. Being something which is extremely unlikely to ever effect me I have not examined it closely, but as far as I can see it is a tax on an estate. Everything over a certain threshold gets taxed, but I can’t see that the number of inheritors is taken into account.
Put it this way, a person who is the sole inheritor of a £100,000 estate pays no tax on it, but a person who inherits a £50,000 slice of a million-pound estate does get taxed. (Is that how it works?). Why not keep a lower threshold but apply it to what is received rather than what is left?
That way a billionaire could escape so-called death taxes if they were really concerned just by spreading the inheritance more widely. Imagine a £250,000 threshold. A £1 billion estate could be split amongst 4000 people with no tax at all, or left to one person who would pay tax on it. A £1 million estate (not so rare now) would be fine if it was shared between several dependents. Sounds a lot fairer to me.
You are sort of right about how Inheritance Tax works. The entire estate is taxed before it’s doled out to the beneficiaries. I think that if an amount or object is specified, you’d get it all if enough is left after taxes (if there isn’t I guess probate gets messy).
We were trying to work it out last night and I think the best bet it to tell everyone that no more than two of them can die in any calendar year!
If the entire estate is taxed before it is doled out then is the tax liability distributed in the same proportions? Or does this has to be specified in a will rather than leaving the whole tax bill with a residual legatee? Or, and I guess this makes more sense, do they take the tax off and then split the money. Still toughest on the residual legatee if the tax bill was more than expected. I think I’ll settle for saving my own money rather than relying on inheriting.
Is is going to be worth spending a year dead for tax reasons?
Only if you are at the Restaurant at the End of the Universe….. :-))
“Residual Legatee”?? Blimey. I’m impressed.
I’ve read a lot of Dorothy L Sayers and the like – they have very corredt lawyers…
Interesting article in todays Guardian on Inheritance Tax. Totally unable to work out how to do a link jobby….(G2 page 4 on)
I think that you all have missed the point. For the average person, it is not about passing the family estate down the generations. Most people will have worked hard to buy a house and wish to exercise their right to give their hard earned money to whomsoever they want to. Let us not forget that the money had already been taxed sveral times before death with income tax, VAT etc etc. How many times do the Government want to tax one piece of income?
Ahh, “A Tired Tax Payer” (who is advertising a tax accountancy), you forget something:
While people have put money into buying a house, the increase in value that the house is likely to to have had in the meantime will likely have doubled that value (just in the last 10 years), and that was down to the market, not to any particular extra effort. That extra value is entirely unearned and is otherwise totally untaxed.
Of course, most estates are still free of IHT, and in many marginal cases it will not even lead to a huge bill.