This 50p tax rate

rick_chasey

W1 wrote:

Rick Chasey wrote:

Stevo 666 wrote:

Rick Chasey wrote:

Do you not think it's mental people don't pay CGT on their house?

Never owned one so never paid an enormous amount of attention, but that's crazy. No wonder there was a housing boom.

Not at all.

If people had to pay CGT on the profit from sale of their principal private residence (PPR) it would simply kill the housing market: anyone sitting on a significant gain wouldn't - or more likely couldn't afford to - move house. This would have some fairly serious implications for anyone that had to move say to get a new job, or who had to sell because they had lost their job.

Just to be re-emphasise, the exemption from CGT applies to your PPR, not to another houses that someone owns - so the filthy rich who have the cheek to own more than one property only get exemption on one of them.

Ah, so CGT would make the market illiquid, rather than stopping it being a tax cheap medium to long term investment?

Having a think, would it though?

Anyone with a significant gain would still see 82% of their gains.

Surely a CGT would just disincentivise people to view property as an investment? Which, right now, post 2008, seems a bloody good idea.

Every time you move house you'd be 18% +SDLT behind the market, so you'd need to find that extra before you could move - no-one would ever sell.

Only on the cash made on it if you even have, and it'd be the same for everyone.

I don't see investors complaining that CGT makes the equity markets illiquid for example.

Torvid

rhext wrote:

Stevo 666 wrote:

BigMat wrote:

Very nice, I'm sure, if you can afford it.

This kind of sums up the basis for those who are pro-IHT: in a word, jealousy.

Ah, the ad hominem argument. Run out of other ideas then?

Surly it's cheaper to not keep moving house? You only move houses without a relocation because you want to trade up or make money out of the one you're in.

IHT is just wong it basically says work hard, try to make differance for your family/loved ones, and then leave them with a bill they will have to sell what you worked hard to leave them to pay.

I doubt i'll get hit with IHT as my folks home is below the cut off but that doesn't mean I think peoples who are above should be taxed cause their parents where fortunate/priortised having an expensive house.

W1

Rick Chasey wrote:

W1 wrote:

Rick Chasey wrote:

Stevo 666 wrote:

Rick Chasey wrote:

Do you not think it's mental people don't pay CGT on their house?

Never owned one so never paid an enormous amount of attention, but that's crazy. No wonder there was a housing boom.

Not at all.

If people had to pay CGT on the profit from sale of their principal private residence (PPR) it would simply kill the housing market: anyone sitting on a significant gain wouldn't - or more likely couldn't afford to - move house. This would have some fairly serious implications for anyone that had to move say to get a new job, or who had to sell because they had lost their job.

Just to be re-emphasise, the exemption from CGT applies to your PPR, not to another houses that someone owns - so the filthy rich who have the cheek to own more than one property only get exemption on one of them.

Ah, so CGT would make the market illiquid, rather than stopping it being a tax cheap medium to long term investment?

Having a think, would it though?

Anyone with a significant gain would still see 82% of their gains.

Surely a CGT would just disincentivise people to view property as an investment? Which, right now, post 2008, seems a bloody good idea.

Every time you move house you'd be 18% +SDLT behind the market, so you'd need to find that extra before you could move - no-one would ever sell.

Only on the cash made on it if you even have, and it'd be the same for everyone.

I don't see investors complaining that CGT makes the equity markets illiquid for example.

OK, sorry pedants - you'd be 18% behind the gains in the market and need to find that + SDLT to find every time you moved house.

Just because it happens to everyone, doesn't make a jot of difference. If the market gains £100 (your house, and the one you're buying), you'd only get £82 of your gain yet need to find £100 to buy your next house.

Equities are far more liquid anyway - they are not comparable markets at all.

bigmat

Stevo 666 wrote:

BigMat wrote:

Very nice, I'm sure, if you can afford it.

This kind of sums up the basis for those who are pro-IHT: in a word, jealousy.

How do you reach that conclusion? I'm not jealous at all. I'm just saying that if you have a home that you can't afford to live in, then you might have to sell it and live elsewhere. I wasn't even commenting specifically in the context of IHT (Greg66 was discussing "mansion tax").

rick_chasey

I'm sure you guys will appreciate the fact that my boss is currently going on a rant about scroungers, how amazing Thatcher was, to the slightly British politically naive Polish girl who joined a few months ago.

I've had to put my fist in my mouth numerous times.

Don't bite the hand that feeds Rick...

W1

Rick Chasey wrote:

I'm sure you guys will appreciate the fact that my boss is currently going on a rant about scroungers, how amazing Thatcher was, to the slightly British politically naive Polish girl who joined a few months ago.

I've had to put my fist in my mouth numerous times.

Don't bite the hand that feeds Rick...

Stand up for your principles Rick, don't feel that you have to work in the City....

DonDaddyD

If 'mansion tax' is wrong because some dear old Lady who bought her house for 59p in the 70s is now somehow sitting on a £1million home and wouldn't be able to afford a tax levy on the privileged of, you know, living there.

And

CGT would be wrong on your primary residence because, well you know, it would destroy the market.

Then why is an inheritance tax somehow OK on a house you may inherit from a loved one - if you plan on living there full time?

Just you know throwing it out there, seeing if it catches the wind....

bigmat

DonDaddyD wrote:

If 'mansion tax' is wrong because some dear old Lady who bought her house for 59p in the 70s is now somehow sitting on a £1million home and wouldn't be able to afford a tax levy on the privileged of, you know, living there.

And

CGT would be wrong on your primary residence because, well you know, it would destroy the market.

Then why is an inheritance tax somehow OK on a house you may inherit from a loved one - if you plan on living there full time?

Just you know throwing it out there, seeing if it catches the wind....

So are you suggesting an IHT exemption for properties to be used by the intended beneficiary as primary residence?

rick_chasey

W1 wrote:

Rick Chasey wrote:

I'm sure you guys will appreciate the fact that my boss is currently going on a rant about scroungers, how amazing Thatcher was, to the slightly British politically naive Polish girl who joined a few months ago.

I've had to put my fist in my mouth numerous times.

Don't bite the hand that feeds Rick...

Stand up for your principles Rick, don't feel that you have to work in the City....

I'm not agreeing with him, but I know for sure it's not in my interest to voice disagreement, unless specifically asked for my opinion.

DonDaddyD

Assuming my rantings here don't start a national movement against the existence of IHT in it's entirety. Then yes.

Lets be honest, except for the really rich the house in any inheritance is going to be the single biggest asset for most to inherit. Making that completely exempt if you plan for it to be your primary home would go a long way.

Assuming you choose to sell it, it should then only be subject to CGT if it is not your primary residence.

I still find the whole thing abhorrent: http://www.inheritance-tax-online.co.uk ... ce_tax.htm

W1

Rick Chasey wrote:

W1 wrote:

Rick Chasey wrote:

I'm sure you guys will appreciate the fact that my boss is currently going on a rant about scroungers, how amazing Thatcher was, to the slightly British politically naive Polish girl who joined a few months ago.

I've had to put my fist in my mouth numerous times.

Don't bite the hand that feeds Rick...

Stand up for your principles Rick, don't feel that you have to work in the City....

I'm not agreeing with him, but I know for sure it's not in my interest to voice disagreement, unless specifically asked for my opinion.

So you're just in it for the money

rick_chasey

W1 wrote:

So you're just in it for the money

We agree on something

rhext

Speaking personally, I'm pretty sure my kids are going to have to pay IHT on my estate.

I still don't view it as either immoral or unfair. I've worked hard and been fairly fortunate in life's lottery. Not megabucks, not £M, but there will be still be some IHT impact.

I've already been able to give my kids a significant leg-up in life. If I die early, my wife will not face an IHT bill and will carry on living in the family home because inheritance by spouses is exempt from IHT. If by some unfortunate turn of fate we both die early, then between us we carry enough life insurance that an IHT bill will be the very least of my kid's worries. It's called 'arranging your affairs properly'.

But if I live out my allotted span, given the advantages my kids have had, I'd like to think that they'll already be carving their own way in society, contributing as they go. So when it comes to distributing my estate, I don't begrudge the rest of society (even W1) a cut, especially since each of my children will still be receiving a fairly significant chunk of cash.

rjsterry

rhext wrote:

Speaking personally, I'm pretty sure my kids are going to have to pay IHT on my estate.

I still don't view it as either immoral or unfair. I've worked hard and been fairly fortunate in life's lottery. Not megabucks, not £M, but there will be still be some IHT impact.

I've already been able to give my kids a significant leg-up in life. If I die early, my wife will not face an IHT bill and will carry on living in the family home because inheritance by spouses is exempt from IHT. If by some unfortunate turn of fate we both die early, then between us we carry enough life insurance that an IHT bill will be the very least of my kid's worries. It's called 'arranging your affairs properly'.

But if I live out my allotted span, given the advantages my kids have had, I'd like to think that they'll already be carving their own way in society, contributing as they go. So when it comes to distributing my estate, I don't begrudge the rest of society (even W1) a cut, especially since each of my children will still be receiving a fairly significant chunk of cash.

This. As I said, the hassle of sorting out muddled financial affairs was far more of a burden in my experience than IHT. Oh and make a will. Even if it's 'obvious' who you want your estate to go to.

Stevo_666

rhext wrote:

Stevo 666 wrote:

BigMat wrote:

Very nice, I'm sure, if you can afford it.

This kind of sums up the basis for those who are pro-IHT: in a word, jealousy.

Ah, the ad hominem argument. Run out of other ideas then?

Nope, just thought I'd take time out from explaining why the housing market is not some sort of casino for the well off to make an observation based on a statement by a pro-IHT person. Got a reaction or two so guess I hit a raw nerve

jedster

I have to say I find this moral uproar about IHT hilarious.

If you inherit then you are lucky. You've been living on something before and you've clearly managed without that inheritance so far. You don't NEED it and if you lose a chunk in tax so be it*.

*If you are an unmarried couple and have dependent children then you can protect them with a simple will using a form bought in WHSmiths. To be honest if you have enough assets to fall foul of IHT then you can afford to spend a couple of hundred quid getting a lawyer to do it for you.

Income tax though... how disgustingly immoral! That's the money that I use to feed and clothe my children and heat the house! How can it be moral to take any of that away?

Obviously I'm not serious about this my point is just "morality" is not a useful distinction here. Tax is a regrettable necessity. In the main Governments have to raise tax where they can efficiently get it. A secondary consideration is what incentives they create by doing so.

Taxing income reduces the incentive to work. Generally a bad thing.
IHT incentivises people to give stuff away before they die. Generally not a bad thing

cjcp

rhext wrote:

cjcp wrote:

rhext wrote:

cjcp wrote:

rjsterry wrote:

@rjsterry - IMO, that's not the way to look at it; there needs to be a reason to tax someone, not a reason not to tax someone. And that applies whether or not the offspring are able to stand on their own two feet. And it applies all the more so in the case of Labour governments, who do an excellent job of p!ssing our money up a rope.

Heh, I was stirring a little. My point was more that there is no less reason to tax inherited money than any other kind of income. The exchequer still needs to raise money somehow (to take TWH's earlier point) - if not IHT, then something else, and the 'social' reasons for IHT have also been put forward. We can argue about where the threshold should be, but that's different from whether IHT is somehow morally objectionable.

IHT is not based on income, it's based on the value of the estate, so it's applied when in the hands of the estate, not in the hands of the beneficiary. If it was the latter, then it would be an income tax. IHT is not the same. IHT causes a lot of distress. Income tax and CGT and what not, you can plan for; not always the case with IHT.

From a moral standpoint, there's no reason why the government should benefit from the size of someone's estate instead of family members.

So it's a tax on dead people, not their beneficiaries. OK, they're not going to miss it, why not let the government have it all?

What evidence do you have for the 'lot of distress' assertion: most estates don't pay it! There are a few special circumstances which could easily be mitigated - but that shouldn't affect the principle.

Let's turn it around: what evidence do you have that most estates don't pay it? If you have it, that's fine, but the point about distress remains: people suddenly find themselves having to deal with a tax liability (even though it's a tax on the estate) which, the day before, they didn't think they';d have to deal with. Think sudden death of a relative + having to deal with the sale of an asset to pay for the tax liability on an estate. It's not hard to arrive at distress.

And it's also possible to incur CGT liability after IHT.

And it's the sudden death issue which means that IHT is not something which can always be mitigated.

As regards the principle, you seem very keen to tax people. Why? Why should people's estates be taxed?

Evidence - http://www.hmrc.gov.uk/stats/inheritanc ... entary.pdf

I'm not keen to tax people, I just accept that tax is a necessary evil and has to be raised somehow. I also strongly believe that as a society we need a mechanism to stop wealth concentrating into the hands of a relatively small number of families down through the generations. If it were me I would:

1) Raise the threshold to something a bit more 'significant' (eg £1M).

2) Apply the threshold by recipient rather than on the estate (ie a proper inheritance tax rather than an estate tax, which is what we have at the moment).

3) Change the 'nil-rate' rules to accommodate the fact that marriage is not the only partnership arrangement these days.

So if you have an estate of £100M, you don't need to pay any tax on it provided you pay no single recipient more than £1M.

3) makes sense, and I agree that taxation is a necessary evil, but not IHT.

I don't see how IHT stops wealth being concentrated in the hands of a small number of families (unless it's wholly punitive, which is wrong), nor do I think that's a reason to tax them: that's just penalising them for being wealthy. The chances are that the people who died have worked hard for their money and want their family/kids etc to be taken care of when they've shuffled off this mortal coil and are pushing up the daisies. That's natural, and they may well have paid a load of tax during their lifetime. I don't see why the Govt should come along and a take a big chunk of it on death.

Taxing the beneficiary isn't fair, either. How would the beneficiary plan for any such liability that bearing in mind that a will can be revoked? If the beneficiary (A) had suffered a detriment - financial or otherwise - by planning for an anticipated inheritance, but there's a big family bust-up, with the provisions in the will being amended so that A no longer inherits anything, it's not hard to imagine wills being challenged in the courts by the likes of A and the administration of the estate dragged on.

I'd heard that, following the 1997 General Election, Jimmy Goldsmith moved to Spain or something because it was cheaper to die there. If it's true, good on him.

(I can't read the link without leaving this page, so I haven't read the HMRC report yet, I'm afraid.)

bigmat

Stevo 666 wrote:

rhext wrote:

Stevo 666 wrote:

BigMat wrote:

Very nice, I'm sure, if you can afford it.

This kind of sums up the basis for those who are pro-IHT: in a word, jealousy.

Ah, the ad hominem argument. Run out of other ideas then?

Nope, just thought I'd take time out from explaining why the housing market is not some sort of casino for the well off to make an obser
vation based on a statement by a pro-IHT person. Got a reaction or two so guess I hit a raw nerve

Where did I even say I'm "pro IHT"?

rhext

cjcp wrote:

I don't see how IHT stops wealth being concentrated in the hands of a small number of families (unless it's wholly punitive, which is wrong), nor do I think that's a reason to tax them: that's just penalising them for being wealthy. The chances are that the people who died have worked hard for their money and want their family/kids etc to be taken care of when they've shuffled off this mortal coil and are pushing up the daisies. That's natural, and they may well have paid a load of tax during their lifetime. I don't see why the Govt should come along and a take a big chunk of it on death.

Taxing the beneficiary isn't fair, either. How would the beneficiary plan for any such liability that bearing in mind that a will can be revoked? If the beneficiary (A) had suffered a detriment - financial or otherwise - by planning for an anticipated inheritance, but there's a big family bust-up, with the provisions in the will being amended so that A no longer inherits anything, it's not hard to imagine wills being challenged in the courts by the likes of A and the administration of the estate dragged on.

I'd heard that, following the 1997 General Election, Jimmy Goldsmith moved to Spain or something because it was cheaper to die there. If it's true, good on him.

(I can't read the link without leaving this page, so I haven't read the HMRC report yet, I'm afraid.)

Almost all the arguments against IHT seem to concentrate on the point of view of the deceased....."penalising them for being wealthy". You can't penalise the deceased, they're dead.

I tend to view this from the point of view of the benficiaries: in receipt of a significant wodge of cash for no better reason than the fact that they were fortunate in their choice of parents. I'm not even against that on principle until you get to a point where the concentration of wealth starts to bring with it a significant concentration of power.

You don't have to go back more than a couple of hundred years to find a situation in the UK where inherited wealth and political power went hand in hand. Above a certain level wealth breeds wealth, and with that comes influence and eventually power and control. To me, the reason that IHT is important isn't about taking tax off people who've accumulated £1M, £10M, or even £100M: by all means raise the thresholds - it doesn't contribute that much anyway as hardly anyone actually has to pay it. The reason IHT is important is that over the last 200 year's it's eroded the wealth, power and influence of an inherited aristocracy and allowed the establishment of a relatively liberal democracy which I happen to appreciate living under. And the reason we need to keep it is that it prevents the re-establishment of this sort of order.

If you really consider it an iniquitous and immoral tax then do a little research, and spend a few quid on a decent accountant: unless you're seriously wealthy you'll be able to get round most of it. But if you're the Duke of Westminster,then better resign yourself to the fact that your firstborn will only own 60% of Central London rather than all of it.....! I'm struggling to get upset about that.

And even at the current levels, the horror stories on here which imply bailiffs turning up at the funeral demanding cheques from the offspring of the deceased simply don't happen. It generally takes several months to sort out probate properly and the worst that can happen is that the parent's home needs to be sold leaving leaving a cash sum (at the very least £350K, but more often £700K) to be distributed to the inheritors. Given that in every single family bereavement I've observed so far, the very first action has been to convert as much of the estate into cash as possible I simply can't believe it's that traumatic.

I think you missed the point about taxing the beneficiary - tax would only be payable from any funds actually inherited. So no-one would ever be in a position where they were liable for tax but didn't actually receive far more than the funds necessary to pay it. And I don't get the bust-up point - if you were planning to inherit, but didn't how does the payment (or otherwise) of inheritance tax affect whether you're likely to challenge the will?

daviesee

Basically this:-

People who are against inheritance tax simply want to choose who to give their (already taxed) money to.
They don't want to give it to the Government to waste on "projects".
If you are society minded you can leave your money to charity.
It is as simple as that.

If you are pro inheritance tax then that implies that you think the Government is responsible with money. Dubious IMHO.

rjsterry

So what would those who are anti-IHT prefer to be taxed instead? There's no chance of the overall tax burden being reduced by the current government; the Treasury needs all the tax it can get, and 'The Cuts' are focused on reducing national debt, so what tax would you put up to compensate?
And it's not as though wasting public money is something limited to one political party: some of the most wasteful public projects - rail privatisation, Tube maintenance, PFI funding of new schools and hospitals for example - were Tory ideas.

rolf_f

daviesee wrote:

Basically this:-

People who are against inheritance tax simply want to choose who to give their (already taxed) money to.
They don't want to give it to the Government to waste on "projects".
If you are society minded you can leave your money to charity.
It is as simple as that.

If you are pro inheritance tax then that implies that you think the Government is responsible with money. Dubious IMHO.

"As simple as that" - do you really, honestly believe that? Irrespective of whether or not you are in favour of a tax, it is simplistic to suggest that this is a simple issue! After all, as soon as you say you aren't in favour of the tax, you then have to decide who is going to be taxed extra instead (though of course this is a bit simplistic as well). The responsibility of the Government to spend tax income wisely isn't really relevant to specific taxes (mostly).

And surely the issue about inheritance tax isn't its existence as such but more the level at which it applies. The problem/issue at the moment is that ordinary people get caught up in it due to the stupid overvaluation of property at the moment. By not clamping down on lending and encouraging house price inflation, the government has enabled itself to gain a nice new tax stream from nothing. Of course, those being hit by IHT on this basis are just effectively losing some of the hyped value of their inherited property anyway - they are still quids in. The loser remains the young people unable to buy property at all.

The one thing this isn't is simple.

rick_chasey

rjsterry wrote:

So what would those who are anti-IHT prefer to be taxed instead? There's no chance of the overall tax burden being reduced by the current government; the Treasury needs all the tax it can get, and 'The Cuts' are focused on reducing national debt, so what tax would you put up to compensate?

Well, after my brainwave, treating all property as an investment, with associated CGT. Whether that would generate much money is a different matter, but it's a start

But yeah > The Americans don't have a big debt because of high spending.

The have a big debt because the spending remained the same, but they cut taxes like crazy.

W1

jedster wrote:

If you are an unmarried couple and have dependent children then you can protect them with a simple will using a form bought in WHSmiths. To be honest if you have enough assets to fall foul of IHT then you can afford to spend a couple of hundred quid getting a lawyer to do it for you.

Please explain how this avoids IHT.

W1

rhext wrote:

If you really consider it an iniquitous and immoral tax then do a little research, and spend a few quid on a decent accountant: unless you're seriously wealthy you'll be able to get round most of it. But if you're the Duke of Westminster,then better resign yourself to the fact that your firstborn will only own 60% of Central London rather than all of it.....! I'm struggling to get upset about that.

And even at the current levels, the horror stories on here which imply bailiffs turning up at the funeral demanding cheques from the offspring of the deceased simply don't happen. It generally takes several months to sort out probate properly and the worst that can happen is that the parent's home needs to be sold leaving leaving a cash sum (at the very least £350K, but more often £700K) to be distributed to the inheritors. Given that in every single family bereavement I've observed so far, the very first action has been to convert as much of the estate into cash as possible I simply can't believe it's that traumatic.

As to your first paragraph, in many ways this is indicative of the point I was making earlier. The Duke Of Westminster's assets are likely to be held in a company and are therefore likely to be IHT exempt.

IHT is easy to avoid, if you know how to, and think you need to. Therefore what is the point of it? It is only really effective against those who may be of relatively modest means; who have benefitted on paper from a property bubble; and who don't consider themselves rich enough to even be concerned about IHT planning. Tax should not be about those who "arrange their affairs" to avoid it.

As to your second paragraph, it sounds like you don't have sufficient experience of situations where the IHT burden is hugely distressing and problematic. In many ways it only effects the unlucky or ignorant.

W1

Rick Chasey wrote:

rjsterry wrote:

So what would those who are anti-IHT prefer to be taxed instead? There's no chance of the overall tax burden being reduced by the current government; the Treasury needs all the tax it can get, and 'The Cuts' are focused on reducing national debt, so what tax would you put up to compensate?

Well, after my brainwave, treating all property as an investment, with associated CGT. Whether that would generate much money is a different matter, but it's a start

But yeah > The Americans don't have a big debt because of high spending.

The have a big debt because the spending remained the same, but they cut taxes like crazy.

You want a more stagnent housing market? Higher rents?

MonkeyMonster

It's time for...

tailwindhome

Can't see the image there MM

Tell me it's Sharktopus.


It is isn't it.

About time too.

jedster

Please explain how this avoids IHT.

see here:

GENERAL EXEMPTIONS - applying both on death and in lifetime

(various other excemptions)

Gifts for the maintenance of family - Any gift for the maintenance of a child who is either under 18, over 18 but in full time education or training, or is dependent upon you because he is physically or mentally disabled, will be exempt from IHT. The gift must be reasonable for the child’s needs.

So basically you put in your will that certain assets are to be dedicated to the maintenance of your children and provided that's reasonable that part of the estate is exempt from IHT. Continuing to live in the family home will be reasonable. The assets will have to go into trust until the children reach the age of 18 (or later if you specify) and will be managed by a trustee until then. The obvious trustee would be your surviving partner/other parent.

HTH

J

jedster

a link
www.tayloremmet.co.uk/pdf...tax/wptt-in ... ptions.pdf