If you join the LibDems in a forest...

Stevo_666

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

Dorset_Boy said:

I'd be inclined to up the rate on residential property.
It is crazy that a couple whose sole asset is a property worth £1.0 million would pay no IHT, yet the couple whose sole asset is investments worth £1.0 million pay £140,000 in IHT.

When you're alive, sale of your main residence is tax free. Not sure why that treatment should change because you're dead.

"Because you're dead" seems like a fairly major change in circumstances.

It doesn't change the nature of the underlying asset, which is generally what determines the tax treatment.

Is there anything you think should be taxed?

I see you are not disagreeing with my point above.

I'm simply agreeing with current UK tax law that your main residence should not be taxed on disposal. Do you disagree with that?

tailwindhome

As metaphors go, a third thread no one is interested in, no one will post in and everyone wonders what's the point of, is a bit on the nose

pangolin

tailwindhome said:

As metaphors go, a third thread no one is interested in, no one will post in and everyone wonders what's the point of, is a bit on the nose

Stop making everything about NI 🙄

rjsterry

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Not sure of the relevance of Canada or NZ's tax regime on inherited wealth. It's unearned income to the inheritors. Don't see why it should be treated any differently than other unearned income.

I am showing that ever higher IHT is not the answer that many counties have chosen, probably for a good reason.

Don't think anyone was suggesting changing the effective rate.

So what are you suggesting?

I didn't suggest anything. I think TBB has suggested widening the scope of IHT. I asked why (hypothetically) income in the form of property from the estate of a deceased person should be treated differently from other unearned income. In most cases that won't be the primary residence of the inheritor. In other words, I'm not sure inheritance is/should be different from other gifts. The limitations on gifts a few years prior to death seem to already acknowledge that they are kind of the same thing.

Stevo_666

rjsterry said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Not sure of the relevance of Canada or NZ's tax regime on inherited wealth. It's unearned income to the inheritors. Don't see why it should be treated any differently than other unearned income.

I am showing that ever higher IHT is not the answer that many counties have chosen, probably for a good reason.

Don't think anyone was suggesting changing the effective rate.

So what are you suggesting?

I didn't suggest anything. I think TBB has suggested widening the scope of IHT. I asked why (hypothetically) income in the form of property from the estate of a deceased person should be treated differently from other unearned income. In most cases that won't be the primary residence of the inheritor. In other words, I'm not sure inheritance is/should be different from other gifts. The limitations on gifts a few years prior to death seem to already acknowledge that they are kind of the same thing.

That's fine - given that income from the sale of a house is unearned income*, then the point that it should not be treated differently from that of a living person is not unreasonable. So given that when a living person sells their main residence it is tax free, why should it be different for the estate of the deceased?

(* Technically its a capital gain not income but that might be splitting hairs )

rjsterry

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Not sure of the relevance of Canada or NZ's tax regime on inherited wealth. It's unearned income to the inheritors. Don't see why it should be treated any differently than other unearned income.

I am showing that ever higher IHT is not the answer that many counties have chosen, probably for a good reason.

Don't think anyone was suggesting changing the effective rate.

So what are you suggesting?

I didn't suggest anything. I think TBB has suggested widening the scope of IHT. I asked why (hypothetically) income in the form of property from the estate of a deceased person should be treated differently from other unearned income. In most cases that won't be the primary residence of the inheritor. In other words, I'm not sure inheritance is/should be different from other gifts. The limitations on gifts a few years prior to death seem to already acknowledge that they are kind of the same thing.

That's fine - given that income from the sale of a house is unearned income*, then the point that it should not be treated differently from that of a living person is not unreasonable. So given that when a living person sells their main residence it is tax free, why should it be different for the estate of the deceased?

(* Technically its a capital gain not income but that might be splitting hairs )

No, the inherited house *is* the 'income' (edit: should be capital. Thanks DB). The future sale can still be tax free if it's then the main residence.

Dorset_Boy

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Not sure of the relevance of Canada or NZ's tax regime on inherited wealth. It's unearned income to the inheritors. Don't see why it should be treated any differently than other unearned income.

I am showing that ever higher IHT is not the answer that many counties have chosen, probably for a good reason.

Don't think anyone was suggesting changing the effective rate.

So what are you suggesting?

I didn't suggest anything. I think TBB has suggested widening the scope of IHT. I asked why (hypothetically) income in the form of property from the estate of a deceased person should be treated differently from other unearned income. In most cases that won't be the primary residence of the inheritor. In other words, I'm not sure inheritance is/should be different from other gifts. The limitations on gifts a few years prior to death seem to already acknowledge that they are kind of the same thing.

That's fine - given that income from the sale of a house is unearned income*, then the point that it should not be treated differently from that of a living person is not unreasonable. So given that when a living person sells their main residence it is tax free, why should it be different for the estate of the deceased?

(* Technically its a capital gain not income but that might be splitting hairs )

Agree the use of the term income here is incorrect and unhelpful. Primarily, you receive capital from an estate. (Though underlying investments may generate some income whilst the estate is settled.)

Stevo - on death, the property of the deceased become a second property for the beneficiaries of the estate and it taxed in the same way as any other second property.

Likewise, if you tried to give away your main home to your beneficiaries whilst alive, it is a PET (Potentially Exempt Transfer) and will remain inside your estate for at least 7 years, and you have to pay a market rent if you continue to live there.

Pross

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Not sure of the relevance of Canada or NZ's tax regime on inherited wealth. It's unearned income to the inheritors. Don't see why it should be treated any differently than other unearned income.

I am showing that ever higher IHT is not the answer that many counties have chosen, probably for a good reason.

Don't think anyone was suggesting changing the effective rate.

So what are you suggesting?

I didn't suggest anything. I think TBB has suggested widening the scope of IHT. I asked why (hypothetically) income in the form of property from the estate of a deceased person should be treated differently from other unearned income. In most cases that won't be the primary residence of the inheritor. In other words, I'm not sure inheritance is/should be different from other gifts. The limitations on gifts a few years prior to death seem to already acknowledge that they are kind of the same thing.

That's fine - given that income from the sale of a house is unearned income*, then the point that it should not be treated differently from that of a living person is not unreasonable. So given that when a living person sells their main residence it is tax free, why should it be different for the estate of the deceased?

(* Technically its a capital gain not income but that might be splitting hairs )

To use your technicality that it is a capital gain then it should be subject to normal CGT rules surely?

kingstongraham

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

Dorset_Boy said:

I'd be inclined to up the rate on residential property.
It is crazy that a couple whose sole asset is a property worth £1.0 million would pay no IHT, yet the couple whose sole asset is investments worth £1.0 million pay £140,000 in IHT.

When you're alive, sale of your main residence is tax free. Not sure why that treatment should change because you're dead.

"Because you're dead" seems like a fairly major change in circumstances.

It doesn't change the nature of the underlying asset, which is generally what determines the tax treatment.

Is there anything you think should be taxed?

I see you are not disagreeing with my point above.

I'm simply agreeing with current UK tax law that your main residence should not be taxed on disposal. Do you disagree with that?

I got bored with that "conversation" where you pretend you can't see that dying might change something about a property being your main residence.

I'm unsure whether a gain on the value of the main residence should be taxed the same as any other capital gain, probably it should, but that is not relevant to any discussion of inheritance tax.

kingstongraham

If you don't like inheritance tax as a concept, what do you think of what the Lib Dems proposed at the last election?

TheBigBean

kingstongraham said:

If you don't like inheritance tax as a concept, what do you think of what the Lib Dems proposed at the last election?

What did they propose at the last election beyond undoing Brexit?

kingstongraham

TheBigBean said:

kingstongraham said:

If you don't like inheritance tax as a concept, what do you think of what the Lib Dems proposed at the last election?

What did they propose at the last election beyond undoing Brexit?

https://www.theguardian.com/commentisfree/2018/sep/12/wealth-inequality-liberal-democrats-economic-reform

expectations of a better life cannot be met without wealth creation. And this needs investment and technological progress through innovation, which in turn requires rewards for the risk-taking entrepreneurs who make it happen. In other words, it is far easier to create a fairer society when the size of the pie is growing. That is why my party recently set out proposals to replace business rates with a far more investment-friendly land value tax.
...
overhaul inheritance tax by taxing recipients – rather than givers – on all large gifts they receive, not just those they inherit. Each person would have a generous £250,000 tax-free lifetime allowance, above which income tax rates would apply. This would close a major loophole that allows people to hand down wealth entirely untaxed if the transfer is made more than seven years before death. It would mean that unearned gifts are taxed at the same rate as earned income from employment.


This principle – taxing wealth and work in the same way – is at the core of our proposals. We would also tax capital gains at income tax rates, and abolish separate tax-free allowances for both capital gains and dividends. All income, be it from employment or wealth, would be eligible for the personal allowance, so that those who depend solely on income from assets would not be unfairly penalised. These changes would also remove the existing incentive for the well-off to shift employment income into other forms – such as capital gains or dividends – to minimise their tax bills.

Another area in urgent need of reform is pension tax relief. Not only does it cost the government £41bn annually, but the existing system of relief is deeply regressive, with 63% of all relief going to the top 15% of taxpayers. We would rebalance it by introducing a flat rate of relief on pension contributions, encouraging lower earners to save for their retirement while cutting tax breaks for the richest. We would also limit the tax-free lump sum people can withdraw from their pension pots, restricting it for those with the largest pots while leaving over three-quarters of pensioners unaffected.

surrey_commuter

kingstongraham said:

TheBigBean said:

kingstongraham said:

If you don't like inheritance tax as a concept, what do you think of what the Lib Dems proposed at the last election?

What did they propose at the last election beyond undoing Brexit?

https://www.theguardian.com/commentisfree/2018/sep/12/wealth-inequality-liberal-democrats-economic-reform

expectations of a better life cannot be met without wealth creation. And this needs investment and technological progress through innovation, which in turn requires rewards for the risk-taking entrepreneurs who make it happen. In other words, it is far easier to create a fairer society when the size of the pie is growing. That is why my party recently set out proposals to replace business rates with a far more investment-friendly land value tax.
...
overhaul inheritance tax by taxing recipients – rather than givers – on all large gifts they receive, not just those they inherit. Each person would have a generous £250,000 tax-free lifetime allowance, above which income tax rates would apply. This would close a major loophole that allows people to hand down wealth entirely untaxed if the transfer is made more than seven years before death. It would mean that unearned gifts are taxed at the same rate as earned income from employment.


This principle – taxing wealth and work in the same way – is at the core of our proposals. We would also tax capital gains at income tax rates, and abolish separate tax-free allowances for both capital gains and dividends. All income, be it from employment or wealth, would be eligible for the personal allowance, so that those who depend solely on income from assets would not be unfairly penalised. These changes would also remove the existing incentive for the well-off to shift employment income into other forms – such as capital gains or dividends – to minimise their tax bills.

Another area in urgent need of reform is pension tax relief. Not only does it cost the government £41bn annually, but the existing system of relief is deeply regressive, with 63% of all relief going to the top 15% of taxpayers. We would rebalance it by introducing a flat rate of relief on pension contributions, encouraging lower earners to save for their retirement while cutting tax breaks for the richest. We would also limit the tax-free lump sum people can withdraw from their pension pots, restricting it for those with the largest pots while leaving over three-quarters of pensioners unaffected.

To me that all seems quite sensible. I would back all income being taxed at the same rate but I would aim for that rate to be 20% with no exemptions.

This would alsoresolve their pension contribution problem which is that I am told that it would be a nightmare to administer through PAYE.

rick_chasey

Why 20%? How have you arrived at that number?

Stevo_666

Dorset_Boy said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Not sure of the relevance of Canada or NZ's tax regime on inherited wealth. It's unearned income to the inheritors. Don't see why it should be treated any differently than other unearned income.

I am showing that ever higher IHT is not the answer that many counties have chosen, probably for a good reason.

Don't think anyone was suggesting changing the effective rate.

So what are you suggesting?

I didn't suggest anything. I think TBB has suggested widening the scope of IHT. I asked why (hypothetically) income in the form of property from the estate of a deceased person should be treated differently from other unearned income. In most cases that won't be the primary residence of the inheritor. In other words, I'm not sure inheritance is/should be different from other gifts. The limitations on gifts a few years prior to death seem to already acknowledge that they are kind of the same thing.

That's fine - given that income from the sale of a house is unearned income*, then the point that it should not be treated differently from that of a living person is not unreasonable. So given that when a living person sells their main residence it is tax free, why should it be different for the estate of the deceased?

(* Technically its a capital gain not income but that might be splitting hairs )

Agree the use of the term income here is incorrect and unhelpful. Primarily, you receive capital from an estate. (Though underlying investments may generate some income whilst the estate is settled.)

Stevo - on death, the property of the deceased become a second property for the beneficiaries of the estate and it taxed in the same way as any other second property.

Likewise, if you tried to give away your main home to your beneficiaries whilst alive, it is a PET (Potentially Exempt Transfer) and will remain inside your estate for at least 7 years, and you have to pay a market rent if you continue to live there.

DB, I know - I have been through this with my own inheritance. The taxability of the inherited house as a second property worked the other way as the probate valuation was a bit on the high side and I generated a capital loss which I've used to shelter some gains in the last year.

The market rent point is anti-avoidance really. There is a way to mitigate the IHT cost if the house is jointly owned and also avoids the market rent requirement. It also helps if one person dies and the other goes into care.

Stevo_666

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

Dorset_Boy said:

I'd be inclined to up the rate on residential property.
It is crazy that a couple whose sole asset is a property worth £1.0 million would pay no IHT, yet the couple whose sole asset is investments worth £1.0 million pay £140,000 in IHT.

When you're alive, sale of your main residence is tax free. Not sure why that treatment should change because you're dead.

"Because you're dead" seems like a fairly major change in circumstances.

It doesn't change the nature of the underlying asset, which is generally what determines the tax treatment.

Is there anything you think should be taxed?

I see you are not disagreeing with my point above.

I'm simply agreeing with current UK tax law that your main residence should not be taxed on disposal. Do you disagree with that?

I got bored with that "conversation" where you pretend you can't see that dying might change something about a property being your main residence.

I'm unsure whether a gain on the value of the main residence should be taxed the same as any other capital gain, probably it should, but that is not relevant to any discussion of inheritance tax.

You might be bored with it but the principle is clear and this is reflected in the increased IHT allowance for property.

Stevo_666

Pross said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Not sure of the relevance of Canada or NZ's tax regime on inherited wealth. It's unearned income to the inheritors. Don't see why it should be treated any differently than other unearned income.

I am showing that ever higher IHT is not the answer that many counties have chosen, probably for a good reason.

Don't think anyone was suggesting changing the effective rate.

So what are you suggesting?

I didn't suggest anything. I think TBB has suggested widening the scope of IHT. I asked why (hypothetically) income in the form of property from the estate of a deceased person should be treated differently from other unearned income. In most cases that won't be the primary residence of the inheritor. In other words, I'm not sure inheritance is/should be different from other gifts. The limitations on gifts a few years prior to death seem to already acknowledge that they are kind of the same thing.

That's fine - given that income from the sale of a house is unearned income*, then the point that it should not be treated differently from that of a living person is not unreasonable. So given that when a living person sells their main residence it is tax free, why should it be different for the estate of the deceased?

(* Technically its a capital gain not income but that might be splitting hairs )

To use your technicality that it is a capital gain then it should be subject to normal CGT rules surely?

If you follow that logic then there should be no tax as a main residence is exempt from CGT.

Stevo_666

rjsterry said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Not sure of the relevance of Canada or NZ's tax regime on inherited wealth. It's unearned income to the inheritors. Don't see why it should be treated any differently than other unearned income.

I am showing that ever higher IHT is not the answer that many counties have chosen, probably for a good reason.

Don't think anyone was suggesting changing the effective rate.

So what are you suggesting?

I didn't suggest anything. I think TBB has suggested widening the scope of IHT. I asked why (hypothetically) income in the form of property from the estate of a deceased person should be treated differently from other unearned income. In most cases that won't be the primary residence of the inheritor. In other words, I'm not sure inheritance is/should be different from other gifts. The limitations on gifts a few years prior to death seem to already acknowledge that they are kind of the same thing.

That's fine - given that income from the sale of a house is unearned income*, then the point that it should not be treated differently from that of a living person is not unreasonable. So given that when a living person sells their main residence it is tax free, why should it be different for the estate of the deceased?

(* Technically its a capital gain not income but that might be splitting hairs )

No, the inherited house *is* the 'income' (edit: should be capital. Thanks DB). The future sale can still be tax free if it's then the main residence.

As you can't really tax a dead person, any tax falls on the estate. So applying the principles that a main residence is exempt from tax, then that gives you the answer.

Agree that any subsequent sale by the beneficiaries should be driven by whether it is their main residence or not. Although as I mentioned above, it doesn't necessarily have the desired outcome for HMRC

kingstongraham

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

Dorset_Boy said:

I'd be inclined to up the rate on residential property.
It is crazy that a couple whose sole asset is a property worth £1.0 million would pay no IHT, yet the couple whose sole asset is investments worth £1.0 million pay £140,000 in IHT.

When you're alive, sale of your main residence is tax free. Not sure why that treatment should change because you're dead.

"Because you're dead" seems like a fairly major change in circumstances.

It doesn't change the nature of the underlying asset, which is generally what determines the tax treatment.

Is there anything you think should be taxed?

I see you are not disagreeing with my point above.

I'm simply agreeing with current UK tax law that your main residence should not be taxed on disposal. Do you disagree with that?

I got bored with that "conversation" where you pretend you can't see that dying might change something about a property being your main residence.

I'm unsure whether a gain on the value of the main residence should be taxed the same as any other capital gain, probably it should, but that is not relevant to any discussion of inheritance tax.

You might be bored with it but the principle is clear and this is reflected in the increased IHT allowance for property.

You might be still pretending, but your acknowledgement of the existence of IHT reflects your acceptance that someone dying changes things somewhat.

Dorset_Boy

Stevo_666 said:

Dorset_Boy said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Not sure of the relevance of Canada or NZ's tax regime on inherited wealth. It's unearned income to the inheritors. Don't see why it should be treated any differently than other unearned income.

I am showing that ever higher IHT is not the answer that many counties have chosen, probably for a good reason.

Don't think anyone was suggesting changing the effective rate.

So what are you suggesting?

I didn't suggest anything. I think TBB has suggested widening the scope of IHT. I asked why (hypothetically) income in the form of property from the estate of a deceased person should be treated differently from other unearned income. In most cases that won't be the primary residence of the inheritor. In other words, I'm not sure inheritance is/should be different from other gifts. The limitations on gifts a few years prior to death seem to already acknowledge that they are kind of the same thing.

That's fine - given that income from the sale of a house is unearned income*, then the point that it should not be treated differently from that of a living person is not unreasonable. So given that when a living person sells their main residence it is tax free, why should it be different for the estate of the deceased?

(* Technically its a capital gain not income but that might be splitting hairs )

Agree the use of the term income here is incorrect and unhelpful. Primarily, you receive capital from an estate. (Though underlying investments may generate some income whilst the estate is settled.)

Stevo - on death, the property of the deceased become a second property for the beneficiaries of the estate and it taxed in the same way as any other second property.

Likewise, if you tried to give away your main home to your beneficiaries whilst alive, it is a PET (Potentially Exempt Transfer) and will remain inside your estate for at least 7 years, and you have to pay a market rent if you continue to live there.

DB, I know - I have been through this with my own inheritance. The taxability of the inherited house as a second property worked the other way as the probate valuation was a bit on the high side and I generated a capital loss which I've used to shelter some gains in the last year.

The market rent point is anti-avoidance really. There is a way to mitigate the IHT cost if the house is jointly owned and also avoids the market rent requirement. It also helps if one person dies and the other goes into care.

Don't confuse husband & wife owning as tenants in common alone, with adding in a child as owner and third tenant. The H&W would still need to pay a market rent for the share they have given away, or it's a Gift with Reservation and still inside their estate.
Different if the child has purchased their share at a fair market price though.

rjsterry

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Not sure of the relevance of Canada or NZ's tax regime on inherited wealth. It's unearned income to the inheritors. Don't see why it should be treated any differently than other unearned income.

I am showing that ever higher IHT is not the answer that many counties have chosen, probably for a good reason.

Don't think anyone was suggesting changing the effective rate.

So what are you suggesting?

I didn't suggest anything. I think TBB has suggested widening the scope of IHT. I asked why (hypothetically) income in the form of property from the estate of a deceased person should be treated differently from other unearned income. In most cases that won't be the primary residence of the inheritor. In other words, I'm not sure inheritance is/should be different from other gifts. The limitations on gifts a few years prior to death seem to already acknowledge that they are kind of the same thing.

That's fine - given that income from the sale of a house is unearned income*, then the point that it should not be treated differently from that of a living person is not unreasonable. So given that when a living person sells their main residence it is tax free, why should it be different for the estate of the deceased?

(* Technically its a capital gain not income but that might be splitting hairs )

No, the inherited house *is* the 'income' (edit: should be capital. Thanks DB). The future sale can still be tax free if it's then the main residence.

As you can't really tax a dead person, any tax falls on the estate. So applying the principles that a main residence is exempt from tax, then that gives you the answer.

Agree that any subsequent sale by the beneficiaries should be driven by whether it is their main residence or not. Although as I mentioned above, it doesn't necessarily have the desired outcome for HMRC

I think we are muddling what actually happens now versus what KG or TBB had suggested. While it's great to inherit, if you were starting from scratch, I don't think you would differentiate between gifts received from whoever and what are essentially gifts received via inheritance. On the other hand I think the taxing of estates (beyond settling up the affairs of the deceased) is something that should carry over into this hypothetical tax system.

Stevo_666

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

Dorset_Boy said:

I'd be inclined to up the rate on residential property.
It is crazy that a couple whose sole asset is a property worth £1.0 million would pay no IHT, yet the couple whose sole asset is investments worth £1.0 million pay £140,000 in IHT.

When you're alive, sale of your main residence is tax free. Not sure why that treatment should change because you're dead.

"Because you're dead" seems like a fairly major change in circumstances.

It doesn't change the nature of the underlying asset, which is generally what determines the tax treatment.

Is there anything you think should be taxed?

I see you are not disagreeing with my point above.

I'm simply agreeing with current UK tax law that your main residence should not be taxed on disposal. Do you disagree with that?

I got bored with that "conversation" where you pretend you can't see that dying might change something about a property being your main residence.

I'm unsure whether a gain on the value of the main residence should be taxed the same as any other capital gain, probably it should, but that is not relevant to any discussion of inheritance tax.

You might be bored with it but the principle is clear and this is reflected in the increased IHT allowance for property.

You might be still pretending, but your acknowledgement of the existence of IHT reflects your acceptance that someone dying changes things somewhat.

If you think about it a bit harder, IHT only exists because you can't tax the dead. So same tax principles should apply, it is just shifting where the burden falls, legally speaking.

The only thing that dying does in cause a disposal to occur.

Stevo_666

Dorset_Boy said:

Stevo_666 said:

Dorset_Boy said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Not sure of the relevance of Canada or NZ's tax regime on inherited wealth. It's unearned income to the inheritors. Don't see why it should be treated any differently than other unearned income.

I am showing that ever higher IHT is not the answer that many counties have chosen, probably for a good reason.

Don't think anyone was suggesting changing the effective rate.

So what are you suggesting?

I didn't suggest anything. I think TBB has suggested widening the scope of IHT. I asked why (hypothetically) income in the form of property from the estate of a deceased person should be treated differently from other unearned income. In most cases that won't be the primary residence of the inheritor. In other words, I'm not sure inheritance is/should be different from other gifts. The limitations on gifts a few years prior to death seem to already acknowledge that they are kind of the same thing.

That's fine - given that income from the sale of a house is unearned income*, then the point that it should not be treated differently from that of a living person is not unreasonable. So given that when a living person sells their main residence it is tax free, why should it be different for the estate of the deceased?

(* Technically its a capital gain not income but that might be splitting hairs )

Agree the use of the term income here is incorrect and unhelpful. Primarily, you receive capital from an estate. (Though underlying investments may generate some income whilst the estate is settled.)

Stevo - on death, the property of the deceased become a second property for the beneficiaries of the estate and it taxed in the same way as any other second property.

Likewise, if you tried to give away your main home to your beneficiaries whilst alive, it is a PET (Potentially Exempt Transfer) and will remain inside your estate for at least 7 years, and you have to pay a market rent if you continue to live there.

DB, I know - I have been through this with my own inheritance. The taxability of the inherited house as a second property worked the other way as the probate valuation was a bit on the high side and I generated a capital loss which I've used to shelter some gains in the last year.

The market rent point is anti-avoidance really. There is a way to mitigate the IHT cost if the house is jointly owned and also avoids the market rent requirement. It also helps if one person dies and the other goes into care.

Don't confuse husband & wife owning as tenants in common alone, with adding in a child as owner and third tenant. The H&W would still need to pay a market rent for the share they have given away, or it's a Gift with Reservation and still inside their estate.
Different if the child has purchased their share at a fair market price though.

I'm not, this is something different which you may be already aware of. What I'm referring to is the set up where you have tenants in common, both of them will their half of the house to the kids and when one dies then the kids get half the house but there is no obligation to pay market rent.

It also has the advantage that if the surviving spouse needs to go into care, when the council come knocking for fees, they only own half a house and not a whole one.

Worked well me. Less so on the IHT side as the estate value wasn't that large, but if my old dear had survived a few more years in care it would have saved me a six figure sum.

Stevo_666

rjsterry said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Not sure of the relevance of Canada or NZ's tax regime on inherited wealth. It's unearned income to the inheritors. Don't see why it should be treated any differently than other unearned income.

I am showing that ever higher IHT is not the answer that many counties have chosen, probably for a good reason.

Don't think anyone was suggesting changing the effective rate.

So what are you suggesting?

I didn't suggest anything. I think TBB has suggested widening the scope of IHT. I asked why (hypothetically) income in the form of property from the estate of a deceased person should be treated differently from other unearned income. In most cases that won't be the primary residence of the inheritor. In other words, I'm not sure inheritance is/should be different from other gifts. The limitations on gifts a few years prior to death seem to already acknowledge that they are kind of the same thing.

That's fine - given that income from the sale of a house is unearned income*, then the point that it should not be treated differently from that of a living person is not unreasonable. So given that when a living person sells their main residence it is tax free, why should it be different for the estate of the deceased?

(* Technically its a capital gain not income but that might be splitting hairs )

No, the inherited house *is* the 'income' (edit: should be capital. Thanks DB). The future sale can still be tax free if it's then the main residence.

As you can't really tax a dead person, any tax falls on the estate. So applying the principles that a main residence is exempt from tax, then that gives you the answer.

Agree that any subsequent sale by the beneficiaries should be driven by whether it is their main residence or not. Although as I mentioned above, it doesn't necessarily have the desired outcome for HMRC

I think we are muddling what actually happens now versus what KG or TBB had suggested. While it's great to inherit, if you were starting from scratch, I don't think you would differentiate between gifts received from whoever and what are essentially gifts received via inheritance. On the other hand I think the taxing of estates (beyond settling up the affairs of the deceased) is something that should carry over into this hypothetical tax system.

Maybe some think it is a good idea but it's very hard to police in practice, other than for stuff which is formally recorded like property ownership.

kingstongraham

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

Dorset_Boy said:

I'd be inclined to up the rate on residential property.
It is crazy that a couple whose sole asset is a property worth £1.0 million would pay no IHT, yet the couple whose sole asset is investments worth £1.0 million pay £140,000 in IHT.

When you're alive, sale of your main residence is tax free. Not sure why that treatment should change because you're dead.

"Because you're dead" seems like a fairly major change in circumstances.

It doesn't change the nature of the underlying asset, which is generally what determines the tax treatment.

Is there anything you think should be taxed?

I see you are not disagreeing with my point above.

I'm simply agreeing with current UK tax law that your main residence should not be taxed on disposal. Do you disagree with that?

I got bored with that "conversation" where you pretend you can't see that dying might change something about a property being your main residence.

I'm unsure whether a gain on the value of the main residence should be taxed the same as any other capital gain, probably it should, but that is not relevant to any discussion of inheritance tax.

You might be bored with it but the principle is clear and this is reflected in the increased IHT allowance for property.

You might be still pretending, but your acknowledgement of the existence of IHT reflects your acceptance that someone dying changes things somewhat.

If you think about it a bit harder, IHT only exists because you can't tax the dead. So same tax principles should apply, it is just shifting where the burden falls, legally speaking.

The only thing that dying does in cause a disposal to occur.

🤣

Stevo_666

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

Dorset_Boy said:

I'd be inclined to up the rate on residential property.
It is crazy that a couple whose sole asset is a property worth £1.0 million would pay no IHT, yet the couple whose sole asset is investments worth £1.0 million pay £140,000 in IHT.

When you're alive, sale of your main residence is tax free. Not sure why that treatment should change because you're dead.

"Because you're dead" seems like a fairly major change in circumstances.

It doesn't change the nature of the underlying asset, which is generally what determines the tax treatment.

Is there anything you think should be taxed?

I see you are not disagreeing with my point above.

I'm simply agreeing with current UK tax law that your main residence should not be taxed on disposal. Do you disagree with that?

I got bored with that "conversation" where you pretend you can't see that dying might change something about a property being your main residence.

I'm unsure whether a gain on the value of the main residence should be taxed the same as any other capital gain, probably it should, but that is not relevant to any discussion of inheritance tax.

You might be bored with it but the principle is clear and this is reflected in the increased IHT allowance for property.

You might be still pretending, but your acknowledgement of the existence of IHT reflects your acceptance that someone dying changes things somewhat.

If you think about it a bit harder, IHT only exists because you can't tax the dead. So same tax principles should apply, it is just shifting where the burden falls, legally speaking.

The only thing that dying does in cause a disposal to occur.

🤣

I guess you've run out of arguments again?

kingstongraham

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

kingstongraham said:

Stevo_666 said:

Dorset_Boy said:

I'd be inclined to up the rate on residential property.
It is crazy that a couple whose sole asset is a property worth £1.0 million would pay no IHT, yet the couple whose sole asset is investments worth £1.0 million pay £140,000 in IHT.

When you're alive, sale of your main residence is tax free. Not sure why that treatment should change because you're dead.

"Because you're dead" seems like a fairly major change in circumstances.

It doesn't change the nature of the underlying asset, which is generally what determines the tax treatment.

Is there anything you think should be taxed?

I see you are not disagreeing with my point above.

I'm simply agreeing with current UK tax law that your main residence should not be taxed on disposal. Do you disagree with that?

I got bored with that "conversation" where you pretend you can't see that dying might change something about a property being your main residence.

I'm unsure whether a gain on the value of the main residence should be taxed the same as any other capital gain, probably it should, but that is not relevant to any discussion of inheritance tax.

You might be bored with it but the principle is clear and this is reflected in the increased IHT allowance for property.

You might be still pretending, but your acknowledgement of the existence of IHT reflects your acceptance that someone dying changes things somewhat.

If you think about it a bit harder, IHT only exists because you can't tax the dead. So same tax principles should apply, it is just shifting where the burden falls, legally speaking.

The only thing that dying does in cause a disposal to occur.

🤣

I guess you've run out of arguments again?

Yes.

kingstongraham

Any thoughts on what the Lib dems suggested? As it had same rules in life and death, you should like it.

Dorset_Boy

Stevo_666 said:

Dorset_Boy said:

Stevo_666 said:

Dorset_Boy said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Stevo_666 said:

rjsterry said:

Not sure of the relevance of Canada or NZ's tax regime on inherited wealth. It's unearned income to the inheritors. Don't see why it should be treated any differently than other unearned income.

I am showing that ever higher IHT is not the answer that many counties have chosen, probably for a good reason.

Don't think anyone was suggesting changing the effective rate.

So what are you suggesting?

I didn't suggest anything. I think TBB has suggested widening the scope of IHT. I asked why (hypothetically) income in the form of property from the estate of a deceased person should be treated differently from other unearned income. In most cases that won't be the primary residence of the inheritor. In other words, I'm not sure inheritance is/should be different from other gifts. The limitations on gifts a few years prior to death seem to already acknowledge that they are kind of the same thing.

That's fine - given that income from the sale of a house is unearned income*, then the point that it should not be treated differently from that of a living person is not unreasonable. So given that when a living person sells their main residence it is tax free, why should it be different for the estate of the deceased?

(* Technically its a capital gain not income but that might be splitting hairs )

Agree the use of the term income here is incorrect and unhelpful. Primarily, you receive capital from an estate. (Though underlying investments may generate some income whilst the estate is settled.)

Stevo - on death, the property of the deceased become a second property for the beneficiaries of the estate and it taxed in the same way as any other second property.

Likewise, if you tried to give away your main home to your beneficiaries whilst alive, it is a PET (Potentially Exempt Transfer) and will remain inside your estate for at least 7 years, and you have to pay a market rent if you continue to live there.

DB, I know - I have been through this with my own inheritance. The taxability of the inherited house as a second property worked the other way as the probate valuation was a bit on the high side and I generated a capital loss which I've used to shelter some gains in the last year.

The market rent point is anti-avoidance really. There is a way to mitigate the IHT cost if the house is jointly owned and also avoids the market rent requirement. It also helps if one person dies and the other goes into care.

Don't confuse husband & wife owning as tenants in common alone, with adding in a child as owner and third tenant. The H&W would still need to pay a market rent for the share they have given away, or it's a Gift with Reservation and still inside their estate.
Different if the child has purchased their share at a fair market price though.

I'm not, this is something different which you may be already aware of. What I'm referring to is the set up where you have tenants in common, both of them will their half of the house to the kids and when one dies then the kids get half the house but there is no obligation to pay market rent.

It also has the advantage that if the surviving spouse needs to go into care, when the council come knocking for fees, they only own half a house and not a whole one.

Worked well me. Less so on the IHT side as the estate value wasn't that large, but if my old dear had survived a few more years in care it would have saved me a six figure sum.

Actually that isn't what happens. A debt equal to the deceased's share is created against the survivor, and that debt is repayable on death of the survivor. However, there is the possibility of losing the RNRB.

surrey_commuter

rick_chasey said:

Why 20%? How have you arrived at that number?

Many years ago I learned that the Inca people had no money so no taxation, instead you would work for the Inca for 90 days of the year. This is how they built their temples without the use of slaves. Anyway that struck me as outrageous but then realised it was only a quarter or 25% so whilst outrageous was fairer than our own system.

I would fund it by no exemptions.

I obviously have not modelled it but that would be my goal