Inheriting complexity

 

Before the election Mr Osborne promised big changes to Inheritance Tax. This proved surprisingly popular, despite the fact that most people will  not be  in the bitter sweet position of having to pay it. There is a £325,000 tax free allowance, which takes care of most people’s estates that they wish to pass onto their children or other relatives. It is of course tax free to pass it on to your spouse, partner or charity of your choice. A married couple effectively have a £650,000 tax free sum available if they have that much wealth.

I guess the reason it was popular is many people think their family might become trapped by IHT. After all more and more homes in the dearer parts of the country are now worth more than £325,000. That does not even buy you a bedsit in central London, nor a house in much of the rest of Greater London. There are areas of expensive property in a wide range of locations around the nation, from Sandbanks in Dorset and Newquay in Cornwall  to Cheshire and central Edinburgh. Maybe it also shows that jealousy is not such  a great political emotion , with many thinking those who have saved and built up assets for their family have a right to pass more of it on.

I am not recommending any reduction in IHT given all the other tax priorities and spending needs of the  present fiscal bind. There is, however, plenty of complexity to grapple with. It might be possible to make it easier to understand and follow. Much of the complexity comes from the idea that you should be able to pass all your money on to your family tax free if you can guess when you are going to die, and give any excess away seven years before you do so. You can then keep £325,000 worth for yourself, and give that away tax free at the end. The government has put in a series of complicated rules and rates to keep people to the 7 year Russian roulette.

If you do transfer assets and dare to die sooner than seven years you pay the tax, but  there is taper relief so the tax is reduced the longer you managed to hang on. Gifts of up to £3000 a year are exempt, as are small gifts of up to £250. CGT can also come into play on death as well, adding to the complications, if you gave away an asset prior to death or sold it below true value which counted as a disposal.   It all makes profitable work for the solicitors and accountants who are needed  now to help people organise their dead relative’s affairs.

Is this the right way to handle inter generational transfers? What is the magic of the seven years? Is transferring most of your asset seven years before you die prudent management, or unacceptable tax avoidance?  Is £3000 a year of gifts per person  a sensible allowance? Is £325,000 too low a tax free limit? Or are you against inheritance in principle, and would you like to see a much lower tax free amount?

 

194 Comments

  1. Daniel Hewson
    September 9, 2012

    Tax free allowance of 1 million, then a 10% tax, that’s surely got to be the right side of the larger curve.

    1. lifelogic
      September 9, 2012

      Just abolish it. Sent a positive message to all for once that if they make money (legally) then after tax it is theirs to do as they wish with.

      1. Daniel Hewson
        September 9, 2012

        The message that’ll send out is Tory party are the party of and for the rich, and on the side of inherited wealth, it’s why they are looking at defeat in 2015, people are fed up of Tory posh boys with no idea of real life, putting their taxes up, and cutting taxes on the wealthy.

        1. ShaunR
          September 9, 2012

          Why is scrapping it so bad? The money in the inheritance has already been taxed; I simply don’t see how the government has any right to taking yet more. I am not rich, but I would like to be, and if I manage to achieve that goal whilst paying all my taxes as my wealth is accrued, I don’t see why I should not be able to leave it to my children (or anyone else, if I so choose).

          1. lifelogic
            September 9, 2012

            Exactly and it is part of the incentive system money you earn after tax is yours.

          2. wab
            September 9, 2012

            “The money in the inheritance has already been taxed.” This is a good sound bite (which is why Republicans in the US use it) but it is a fundamentally shallow view. With the same logic we also should not have VAT, stamp duty, council tax, etc., since the money used to pay for these has “already been taxed”. There are good reasons to scrap inheritance tax (e.g. couples who are not married or in civil partnerships do not qualify for the doubling of the tax free amount) but this “already taxed” argument is not one of them.

          3. lifelogic
            September 10, 2012

            Wab it is a perfectly valid argument to say it has already been taxed and should not be further taxed. It should be your money to spend or give away as you like otherwise why bother to earn it. Clearly it may be taxed further by VAT etc. when you spend it or when the person you give it to spends it. But that is not the same as just grabbing 40% of it when you die or taxing lifetime transfers to trusts. The government provides services and should charge a service charge for these, not think all money belongs to them. At the moment they spend about £10K per person PA (about double what they should br spending). But why on earth should they grap perhaps several millions off some individuals for these few and poorly delivered services they offer?

        2. lifelogic
          September 9, 2012

          They are fed up with Tory posh boys who say one thing do another and just continue the over tax, over borrow, endless waste, quack greenery printing money and cannot get any growth as a direct result.

          What they want is someone who actually has and puts a positive pro business, pro jobs, pro growth vision and believes in small efficient government, fewer regulations, less EU, less tax a growing economy and that people spend their own money better than the state does. Also someone who could win the next election.

          Why was the £1M IHT threshold “promised” by “morally repugnant” Osborne so popular otherwise?

          1. APL
            September 9, 2012

            Lifelogic: “They are fed up with Tory posh boys who say one thing do another .. ”

            We are fed up with Socialists masquerading as Tories so as when they accidentally nearly get themselves elected they can continue with Socialist policies .. just not quite as fast actual Socialistas.

          2. Muddyman
            September 10, 2012

            Lifelogic
            And which party would this be?.

        3. Electro-Kevin
          September 9, 2012

          Daniel – £350k represents quite a modest house nowadays. Hardly rich.

          This is about incentivising and rewarding those of the lower order of wealth.

          (I have no inheritence coming my way)

          1. Electro-Kevin
            September 9, 2012

            Posted in haste, Daniel. I get your point now.

      2. Disaffected
        September 9, 2012

        Well said. The money is earned and tax paid on it. If we do not work for our families who are we working for?? Mass immigration, welfare lifers,overseas aid, tax and wasteful spend governments? Jealous socialism must stop, as well as public school boy notion of charity. Individuals decide which charities they want to donate to not governments. No IHT, No CGT Reduce VAT, no stamps duty. Tax is a necessary evil and must be set at the lowest level.

        However, tax MPs expenses like everyone else, change their pensions from RPI to CPI like everyone else, make them work at least 40 hours each week-no second jobs, interest groups payments, no employment of relatives etc. No second homes bought by taxpayers money, alternatively tax the equity made from the taxpayers’ share at 100% or the house handed back to the state, use the olympic village accommodation instead- we paid for that as well.

        Reply MPs do work more than 40 hours a week, there is no scheme to buy a second home, and expenses are taxed or exempted under the same law as for everyone else.

        1. Electro-Kevin
          September 10, 2012

          Disaffected – I should imagine that a dedicated MP is working for a very modest hourly rate.

          1. Bob
            September 10, 2012

            @Electro-Kevin
            “…a dedicated MP…”

            Did you see the report on Order-Order.com?

            Name Debates Attended Expenses Claimed
            G. Brown 1 £127,197
            P. Hollobone 120 £7,546

            Say no more.

          2. APL
            September 10, 2012

            Bob: “G. Brown, 1, £127,197”

            I bet it was a CORKER of a contribution to the debate, he must have been exhausted, poor fellow.

            Here is another opportunity to reform the House of Commons, the pay and expences of the sitting MP should be found out of a local levy raised within his own constituency. Not from the general tax fund.

            It’s not the House of Lords that needs reform, although it could be de-reformed back to the successful organisation it used to be before all the rejected politicians got their sinecures, No it’s the House of Commons that is in need of reform.

            If your council tax included an entry reflecting the cost of an MP, similar to the cost for water and sewars, that might generate some more interest in Westminster politics.

        2. Disaffected
          September 10, 2012

          JR, some MPs do others do not. There are MPs who still claim interest payments on their seconds homes as you fully well know. So MPs are not exempt from community charge on their second homes? Is this not tax? How is the change in pensions from RPI to CPI coming along with MPs? Has the Kelly report has been implemented or is it sitting on a shelf collecting dust.? Much work required to clean up Westminster and bring MPs in line with everyone else. Until then, MPs ought not lecture any section of society about values, morals, pay, pensions, bonuses etc.

          Reply: Mortgage interest is no longer allowable as an expense.

        3. dan
          September 10, 2012

          Why are some MPs still receiving payment for mortgage interest claims on 2nd homes in London?
          Isnt that outside the rules?

    2. Richard1
      September 10, 2012

      Sweden – often cited by the Left as egalitarian Nirvana – abolished Inheritance Tax 7 yrs ago.

      1. uanime5
        September 10, 2012

        What did they replace it with? Higher sales tax?

  2. Single Acts
    September 9, 2012

    Not a tax expert so I maybe wrong, but as I understand it, if one child inherits an estate worth £325K it’s al tax free, but of ten kids inherit an estate worth say £400K at £40K each the tax man demands a share.

    Seems odd to me? We don’t say “well if a firm’s payroll is below X everyone gets tax free salary, but the minute it goes over that, even the tea lady is on the hook for income tax”

    1. lifelogic
      September 9, 2012

      Indeed but why tax it all? You can waste it on high living so why on earth can you not give it to anyone you like without loosing 40% to help buy a house for your children for example. What is the point of earning it if you cannot do what your want with it?

      1. Single Acts
        September 9, 2012

        Indeed, you are preaching to the anarcho-capitalist choir in my case. I would say goodbye to taxes and government in its totality.

    2. Denis Cooper
      September 9, 2012

      It seems odd to me as well, which is one reason why I’d much prefer to see the present “inheritance tax”, which is “estate duty” by another name, replaced by a “legacy tax” levied on the personal benefit received by each of the inheritors rather than on the total estate prior to distribution.

      The effect would be that the potential tax liability would be less if the estate was to be divided between a number of children rather than it all going to one child, as each of the beneficiaries would have his own lifetime personal taxfree allowance to set against the value of that legacy and any other legacies he received.

      It would shift the burden of dealing with potential tax liabilities from the executor to each of the beneficiaries, which would make the task of the executor easier but would no doubt provoke objections from the Inland Revenue, the taxation of dead persons’ estates having always been seen as an easy option.

      1. Disaffected
        September 9, 2012

        Totally disagree. If you have earned your money it is yours to do as you please. Income tax should not be as high either. No matter how much someone earns the state should not get a larger proportion than the person earning it. Try the US income tax increment scale.

        1. waramess
          September 10, 2012

          Disaffected, the money might be yours before you die but afterwards it is not and after you die you have no rights.

          After you die it is not about the rights of the “giver” but the rights or wrongs of the receiver who has done nothing to earn the money and is receiving it as no more than a windfall.

          If it is indeed a windfall then why should we not all enjoy the benefits? Why tax the inheritance at all? Just let it all revert to the state and allow us all to enjoy the proceeds through the benefit of lower taxes.

          Not a very popular view because it prevents all those inflated egos from passing on the proceeds of their success to undeserving children etc.

          By all means permit the wealth to pass tax free to the spouse but from then on lets see a level playing field.

          1. Disaffected
            September 11, 2012

            I worked for my children and family all my life. Before I die I think I have the right to say who I will give it to, including my children, it is my choice. If I wanted to give it to the state or charity it is my choice as I earned the money. The state is a waster and totally undeserving as they take too much from me now.

    3. Max Dunbar
      September 9, 2012

      Would have thought that the £75000 would be taxed in aggregate irrespective of the number of beneficiaries.

  3. Brian Taylor
    September 9, 2012

    In sales the saying was ,
    K Keep
    I. It
    S. simple
    S. Stupid

    Why make employment for solicitors and accountants.

    1. lifelogic
      September 9, 2012

      Indeed recovery will come from reducing the number of parasitic activities, feeding off businesses and the rich – many in the state sector, but many too in the legal and accounting professions and in compliance with absurd regulations (employment and the like) – all over the place. Release them to do something productive for a change.

    2. Mike Stallard
      September 9, 2012

      Brian, I totally agree.
      IF ONLY the Chancellor would devote his energy and charm and education towards simplifying the taxation system and shrinking the bossy, unnecessary state in the way our host suggested was back in 2011!
      But no. that is not how it works.
      We are now well over £1,000,000,000,000 in debt and the deficit is climbing and the tax take, as I understand it, it falling too.

    3. uanime5
      September 9, 2012

      Why would someone in sales want to keep things simple? Wouldn’t it make more sense to make things as incomprehensible as possible to make it easier to sell people things they don’t need?

      Instruction manuals are another matter.

  4. lifelogic
    September 9, 2012

    Transfers between husband and wife are not tax free where the recipient is non UK domiciled for IHT purposed something often overlooked. The civil partnership rules can and are easily abused for IHT planning.

    Non domiciles only pay IHT on UK assets only unless they have been in the UK for 17 of the last 20 years. This makes many leave and this is not good for the country or tax for revenue.

    The popularity of Osborne’s broken promise perhaps come from the fact that everyone can see the immorality of grabbing 40% of some one’s wealth that they have already paid tax on (usually just to waste it in the usual government ways). It creates, as you say, endless pointless work for lawyers, accountants and companies who often use the situation to exploit the situation and earn large fees.

    It also worries the elderly for no good reason and encourages the wealthy to leave the country or simply not come. The tax has many negative effects too. It also is unfair to larger families as a single child can inherit £650K tax free but five might only get £130K before taxes have to be paid.

    A rich person might well stop working thinking I have to pay up to 50% when I earn it then 40% of the balance when I die why bother?

    After all if you can squander all your money by spending it all why on earth can you not give it to your children?

    The Tories should just promise to abolish IHT when (if ever) they have the Libdems off their throats. It would, for once, show a proper sense of direction and do much for confidence. It raises relatively little tax anyway due to the use of planning.

    Of course verbal promises from Cameron and Osborne are not worth the paper they are written, as we all know. So would any promises from him be believed at the next election clearly not.

    1. lifelogic
      September 9, 2012

      The message should be:-

      Anyone who can make a few million (legally) has done very well for themselves, for tax receipts, for jobs and for the country. They should be able to do what they want with the money without further taxes on the capital. People should be encouraged to do this not mugged.

      The UK should welcome the rich and hard working. It is their money which they will nearly always use more wisely than the government. It is not the government’s to squander on the EU, the pigis, green tosh, propaganda, diverting to mates or buying votes.

      1. uanime5
        September 10, 2012

        Unless the wealthy made their millions by avoiding large amounts of tax. Then the wealthy have clearly not contributed enough to the tax revenues and shouldn’t be surprised if HMRC tries to get the taxes they avoided paying after they’re dead.

    2. oldtimer
      September 9, 2012

      Both you and earlier commentators make very good points. Why bother to work in your later years? The tax man will take c50% in income tax on any earnings, will take 40% of dividend income from investments, will take 28% in CGT on realisation of any capital gains, will take 40% in IHT on death once you go over the tax paying thresholds. There is no doubt that the ill-gotten gains are the gains made by the tax man at every turn.

      1. Robert Christopher
        September 9, 2012

        I know of many people ‘in their prime’, with much experience, working reduced hours, and by choice.

        It’s a no brainer! The rewards are not worth the extra effort.

    3. Bazman
      September 9, 2012

      Ain’t going to be a great concern to 95% of the population and anyone on minimum wage is it? Inheritance tax is a just tax. Why should anyone just get money for nothing and how will this be an incentive them? It just creates more inequality in our society they ring-fence privilege and destroy hope for the majority of people in the UK. That loss of hope is now really basic, millions of young people won’t be able to afford houses because of the distortions in the property market that wealth imbalances, much of it non-dom, tax avoidance and inheritance has fuelled and created.

      1. Bob
        September 9, 2012

        @Bazman
        “Why should anyone just get money for nothing and how will this be an incentive them? “

        The money will be given to someone for “nothing”, just not someone the deceased would have chosen to give it to.

        What kind of incentive does it provide to the recipient?
        Not to bother finding a job I guess.

      2. lifelogic
        September 9, 2012

        Yes it is of concern as it will help generate real long lasting jobs for them.

        1. Bazman
          September 9, 2012

          ???

    4. uanime5
      September 9, 2012

      Well if the rich stop working that will create more jobs for people who aren’t as rich.

      1. Bob
        September 10, 2012

        @uanime5
        “Well if the rich stop working that will create more jobs for people who aren’t as rich.”

        That is a gross over simplification.

  5. merlin
    September 9, 2012

    1) I totally disagree with IHT-why should a family who has worked hard and been successful hand over 40% of its wealth to government after the tax free allowance.

    2) I know better than the government how to spend my own money.

    3) The government is insatiable for your money, it gets plenty of money from intestacy-watch the heir hunters if you don’t believe me.

    4) £3000 and £250 is pathetic as as far as gifts are concerned

    5) The 7 year rule is pointless why should you wait 7 years just to get your own money?

    I speak from personal experience, and the only good thing that has happened re IHT is the doubling of the IHT allowance from the mother and father. I am actually in the 7 year rule nonsense because my own solicitor does not believe that my mother who is a widow has an estate worth more than £650,000 which she doesn’t. I would like my rightful inheritance today but, as you say John, the rules are complex, and Solicitors obviously do not trust the system. I cannot afford expensive lawyers and have to wait the full 7 years just to get my own money-what if I die in between? The solicitor does not give a damn about my own personal circumstances, he is only concerned with the law. As I have stated before family trusts do not ensure that you avoid inheritance tax and if there is more than one trust you pay IHT on each individual trust. I have paid far more in IHT than I will ever get out of it and could have invested my own money to create a higher income than the pathetic state pension ( one of the meanest in the western world ), I will eventually receive if I survive that long. To put it simply the Government takes more from you than you get from it and even takes tax when you are dead. So, the less Government and the less taxes the happier I am. IHT should be abolished.

  6. The Prangwizard
    September 9, 2012

    I believe it should be abolished entirely. It affects the modestly wealthy, say those with a house worth £500,000 or so, but those who are very well off are little affected, and it is in the housing stock where a lot of the money is held. These middle wealthy should be able to benefit their children, like the very wealthy do quite easily, and not be anxious about tax just because their house has increased in value. The Government should cut its own bloated and wasteful expenditure to compensate the loss. Hard times demand imagination ans nothing will ever get done if we take the timid view always.
    As I have asked before, where are the courageous leaders, with the vision? Tinkering will not do, we always tinker.
    If anyone is wondering, I am well below the threshold.
    And where is the vigorous condemnation of the ‘mansion tax’ being pushed by the looney-left LibDems? A clear attempt to destroy personal wealth, another example of the confiscation of capital, the very same extreme Socialist philosophy of the hard left. It shows exactly where Cable’s beliefs are and what motivates him. We must vigourously confront and roll back this relentless move to Socialism.

  7. A.Sedgwick
    September 9, 2012

    IHT is a middle class property tax, that is why Osborne’s party conference “pledge” (ha ha) rocketed the Conservative popularity. Quite simply it should be replaced with an increase in stamp duty on higher value homes and the seller should pay the duty and not the buyer.

    1. lifelogic
      September 9, 2012

      Turnover taxes are silly and ones of 7% absurd. What difference does it make if buyer or sell pay it. It is the same just at a slightly different purchase price.

      1. A.Sedgwick
        September 9, 2012

        Silly and absurd are not very constructive adjectives. The seller effectively pays the stamp duty by price negotiation so why not correct the anamoly and if IHT is to be replaced by a property tax it makes more sense. Politically no Party is going to abolish IHT without a viable and arguable replacement.

        1. lifelogic
          September 10, 2012

          Silly and absurd may not be constructive words but they are accurate. Turnover taxes like stamp duty discourage transfers of assets which harms the economy and efficiency.

          IHT does not raise much anyway and discourages people for working. More money would be raised through other spending taxes if it were just abolished. It is politically very popular as we saw with the Osborne £1M threshold “promise” and it would send out the right message.
          Namely if you become rich the Government will not steal it all off you.

  8. Leslie Singleton
    September 9, 2012

    You are right of course but there is one aspect of this complexity you do not touch on and it is crucial. I remember when I was an Articled Clerk a long time ago having it explained to me that what might be called the complexity at any point in time in our tax laws was not in itself too big a deal (of course the complexity has multiplied 100 times since then) because what was and is a bigger problem in many ways is that even in the impossibly unlikely event that all tax laws were done away with tomorrow, the legacy of the tax laws (naturally changing and becoming more complex every year) of prior years remained such that it would be say a decade at least before any meaningful reduction in the burden could be achieved. In other words, even with the will, which isn’t there, it would be a Herculean task to reduce the tax laws even over time and, immediately, it is simply impossible.

    As I have said before, when I went to work in America it took five minutes to learn everything there was to know about Federal, State and Local Tax. Three simple returns with a couple of pages of understandable notes behind each. I confuse easily as you may have noticed (though I am an FCA) but I have never got close to understanding what is so different about this country except possibly the jealousy of those who, and those whose family before them, have done better than most.

    1. wab
      September 9, 2012

      “It took five minutes to learn everything there was to know about Federal, State and Local Tax.” This is a joke, which unfortunately you repeatedly make. The US federal tax form by itself is far, far more complicated than the UK tax form. If you think it only took you five minutes to understand everything about US tax law then I would never hire you as an accountant. You could not even read and understand the instructions for the 1040 in five minutes.

      1. Leslie Singleton
        September 9, 2012

        Sorry wab, I remember what I remember and I have said it only once before not “repeatedly” and it is or certainly was true. You seem to be confusing the whole of US tax law with the bit that concerned me which is of course what I was talking about. I apologise if I misled you but in the UK it is a standing joke that people do not understand their own tax matters. even a seemingly simple brief as like as not rapidly becoming a long and complicated matter of opinion with exceptions to exceptions right and left and uncertain future result. I take it you are American and doing your CPA exams. If so I wish you well and Good Luck. My barbs were of course aimed at the complexity in the UK.

  9. Alex
    September 9, 2012

    IHT is very important if we want to live in a meritocracy as it serves to do a generational wealth reset (given that there is a finite amount of wealth / housing).

    The trouble is that it doesn’t work. It targets the middle class and not the rich.
    Because it is a regressive tax. Because the richer you are the more you can safely pass on over 7 years before you die.

    IHT should tackle multi-generational (3 or more generations) inheritance. Again because it goes against afhievement on merit and it also likely to result in bad capital allocation ( people are generally loss averse apart from entrepreneurs – the Dysons of this world will make greater productive good with their money than inheritees).

    Solution options
    1 get rid of the time limit and make it a tapering amount.

    2. Relate the amount of income tax you have paid to the amount of inheritance tax. If you havent paid much income tax relative to the size of your estate then your estate should be subject to much more IHT. (the proceeds of crime act uses a similar principle).

    Basically if you have earned it in your lifetime then it should be subject to minimal IHT.
    If your wealth has been inherited ( i.e. not earned) then it should be subject to significant IHT.

    1. Leslie Singleton
      September 9, 2012

      Dear Alex, Let it be recorded that there are people out there, and I am one of them, who disagree vehemently with you. You talk enviously of an individual’s wealth but what about the family’s wealth, where is the big difference in principle that you apparently see but which many of us don’t? Many of us still believe in something, a unit, called the family and if that particular unit has been successful, very much including over prior generations, I see no reason why anything should be stolen from it just because someone has died–people do die and fairly routinely so. Many people move Heaven and earth in sacrifice for their children and other heirs and more power to them. Of course I realize that what I am saying doesn’t go down well with a lot of women who now consider themselves not just equal with men but identical, so the concept of head of the family hardly exists in their minds, or with the preposterous idea of homosexual marriage with its lack of a continuing blood line, not to mention with massive immigration. Too bad.

      1. Alex
        September 9, 2012

        Hi Leslie,

        That’s great, I believe in capitalism.
        I believe that the people who contribute to society should reap the spoils.
        The city hot shot who generates fantastic fantastic returns, the entrepreneurs who create transformative businesses ( Brinn, Jobs, Gates, Stelios I), medical breakthroughs, you get the picture.

        What I see as a failure are the multi generational inheritees who sit on their arses doing nothing who under the current system get geometrically richer.

        IHT is supposed to fix this and doesn’t work so it should be either fixed or scrapped.

        If this doesn’t get fixed then we are heading back to aristocratic times ( and it’s associated bad capital allocation).

      2. uanime5
        September 10, 2012

        Why would people be able to inherit wealthy because their grandparents or great grandparents worked hard? If they want wealthy they should work for it, rather than expect to have everything handed to them.

        1. Bob
          September 10, 2012

          @uanime5

          “…they should work for it, rather than expect to have everything handed to them.”

          The precedent has already been set by government.
          They have been handing money to the work-shy for many many years.

          1. uanime5
            September 10, 2012

            The Government giving money from people who can’t find work is very different from people getting money because their parents or grandparents were wealthy.

          2. Bob
            September 11, 2012

            @uanime5
            “…can’t find work…”?

            It’s more likely that they don’t try.

            Millions of immigrants can come here and find work, but we have a hard core of 1-2 million resident unemployed, many of whom have never had a job in their entire lives. And if you were an employer you wouldn’t want them, because as a result of welfarism they have become unemployable.

        2. Cliff. Wokingham
          September 10, 2012

          Boo hoo hoo
          They’ve got something I haven’t got. Take it off them.
          Boo hoo hoo.
          It’s the socialist’s way.

          1. waramess
            September 10, 2012

            I can’t really see anything socialist about not wanting a few undeserving individuals to receive wealth they heve not created.

            What moral right does a recipient under a will have to the inheritance other than his association with the deceased?

            Far too much emphasis is given to the deceased “rights”, which of course no longer exist, and too little to the undeserved plunder by the recipients.

        3. Richard1
          September 10, 2012

          The reason their parents and grandparents worked hard was very likely in order to be able to benefit their children and grandchildren. Confiscate wealth on death and you remove an incentive to work and to entrepreneurship.

          1. uanime5
            September 10, 2012

            IHT doesn’t remove an incentive to work or entrepreneurship because you can still use your money to benefit your children and grandchildren while you’re still alive.

    2. oldtimer
      September 9, 2012

      I believe your ideas will add to the mountain of complexity that afflicts the tax laws of this country.

    3. lifelogic
      September 9, 2012

      “want to live in a meritocracy”

      It is not a meritocracy nor can it ever be one. People have accidents, fall ill, win the lottery, have drug addict parents, get lucky/unlucky in business or marriage or countless other thinks both positive and negative. What role of government is it to grab peoples money off them on the meritocracy ruse? Other than, perhaps, the £5,000 each which is more than enough to provide basic services of law and order, defence and a few others actually needed.

  10. Alan Wheatley
    September 9, 2012

    “civil partnership rules can and are easily abused for IHT planning” sent my thoughts at a tangent.

    One of the inequities of the civil partners legislation is that the legal status it gives same-sex couples is not extended to, say, two unmarried brothers living in the family home inherited from their parents. On the death of one his estate is liable IHT, which can mean the home has to be sold to pay the tax; the other can not inherit tax free.

    So, could the brothers become civil partners, after all they likely love each other (in a brotherly way), there by enabling the survivor to inherit free of IHT. Or would this be treated as incestuous?

    1. Leslie Singleton
      September 9, 2012

      Yes indeed Alan, further to my comment above, the very idea that homosexuals should be treated for IHT purposes more favourably than as you say brothers just because they are homosexual is another example of what I see as antipathy towards the family. Scarcely believable.

      1. wab
        September 9, 2012

        People who are in civil partnership are in the same family (this is the 21st century now). So although I would say that it is ridiculous that people who are married or in civil partnership get special tax breaks from the State, your claim about “antipathy toward the family” does not stack up.

        1. Bob
          September 10, 2012

          @wab
          “…your claim about “antipathy toward the family” does not stack up.”

          Depends on your concept of “family”.

    2. uanime5
      September 10, 2012

      Hopefully when gay marriage is legalised civil partnerships can be used for inheritance reasons.

      1. Bob
        September 10, 2012

        While on the subject:
        Teachers who refuse to endorse gay marriage in the classroom could face the sack under controversial Government reforms, a legal expert has warned.

        http://www.telegraph.co.uk/news/9531803/Teachers-face-sack-for-refusing-to-endorse-gay-marriage.html

        1. uanime5
          September 10, 2012

          Are there even any stories or textbooks used in schools that feature same sex marriage? I think English Literature is the only subject likely to be affected by this.

  11. David Price
    September 9, 2012

    Don’t bother changing it. No matter how fair or rational the reason the socialist libdems would never accept anything which allows someone to give an “unfair” advantage to their offspring over the rest. After all, that privilege is only reserved for the party faithful and their media chums.

    The problem you have is that the socialists are far more successful at PR than Cameron & co, you only have to look at the Remploy fiasco for example.

    Even if you could change IHT this isn’t an appropriate time to do it while other taxes and duties which affect everyone are increasing (VAT, energy obligations etc) and we have the BoE destroying the value of the money we are able to earn, spend and save.

    We have too many people in the public sector and on welfare consuming too many imports. I think we need to be figuring out how to reduce imports and significantly increase the proportion of people in the private sector and generating exports rather than how IHT to should be adjusted.

  12. Alan Wheatley
    September 9, 2012

    While all taxation can be disliked, IHT seems to me morally obnoxious.

    It is natural and right that parents seek to do the best they can for their children. They spend a lot of money bringing them up through childhood and education, and often support them at various stages in later life, such as looking after grandchildren and helping with the deposit for a mortgage. So it obviously follows they would like their estate on death to pass to their children, and if the government is trying to nick some of it to do what they can to minimise what the taxman gets.

    This can put parents in a very difficult position. To take advantage of what the rules allow means giving up control of your assets. What you think the children will do during the remained of your life may not be what they actually do do. Of course, you can take the view that THEY do not pay any tax in any event, it is YOUR estate that is taxed, and so you will act entirely to your benefit and not at all to the children’s. Either way, IHT is detrimental to good family relations.

    1. Bob
      September 9, 2012

      @Alan Wheatley

      Hence the Nanny State replaces the family unit.
      It’s by design, it’s called socialism.

    2. lifelogic
      September 9, 2012

      Indeed IHT is detrimental to good family relations – and to important incentives and to economic growth.

      1. uanime5
        September 10, 2012

        What rubbish. Inheriting wealth has little to no effect on economic growth.

        1. Bob
          September 10, 2012

          @uanime5

          What about when a child uses the inheritance from their parents to finance a new business and create employment for others?

          Or would you prefer to just take the money from the deceased parent and pay it out to welfare claimants, so that they can remain unemployed?

          1. uanime5
            September 10, 2012

            Given the posts on this board about how most people won’t hire someone because of all the regulations and how difficult it is to fire people I doubt that anyone who sets up a business will create much employment for others.

          2. Bob
            September 11, 2012

            @uanime5

            You employ people when you have to, but it’s major obligation for the employer.

            For the employee, they can do as they please and resign with minimal notice without facing a compensation claim at a tribunal.

            It’s very one sided.

  13. Brian Tomkinson
    September 9, 2012

    Osborne’s pre-election IHT promise was the one and only thing that he has ever said which garnered popularity and public support. Not surprisingly his promise was dropped after the election and his popularity now is such that he is openly booed at the paralympic games ( just why it was thought a good idea to have him presenting medals is a mystery). Not only is IHT complicated and intrusive, it is the state demanding money from the bereaved in their time of grief. It is a callous exercising of state power over the individual. It is an iniquitous tax. Furthermore the state demands its share of the estate before any one else except the funeral director. If a family with young children lost both parents and their house was valued at say £800,000 with savings of £10,000 then the state would demand from the estate, in effect those children, £64,000 in IHT. Some or all of this would have to be paid before probate was granted and the executors would have to take out a loan to pay the gready state and sell the family home. Where will the children then live? Who cares? Certainly not the state which has taken its pound of flesh. Abolish this tax.

    1. uanime5
      September 10, 2012

      Clearly you have no idea how IHT works regarding young children.

      This might surprise you but unlike on TV young children aren’t capable of running a house and paying for utilities by themselves, especially when they have no source of income. So when their parents die the family home is almost always sold and the children go to live with relatives.

      1. Brian Tomkinson
        September 10, 2012

        IHT doesn’t differentiate on age. Since you know so much about it, it is rather surprising that you have totally ignored it in your reply. From your other inane comments, no doubt you would be happy if all income and wealth were confiscated by the state.

        1. uanime5
          September 10, 2012

          I’m under no obligation to explain how the law works, especially to those who haven’t done basic research. But since you asked here’s what the law says.

          IHT has to be paid by the executor within 6 months of the death or paid in yearly instalments over 10 years. So there’s no need to take out a loan to pay it.

          http://www.hmrc.gov.uk/inheritancetax/paying-iht/who-pays.htm

          I already explained why the house would have to be sold whether there was or wasn’t IHT so there’s no need for me to explain it again.

      2. Bob
        September 10, 2012

        @uanime5
        Depends on the age of the children.

        But the point stands, why should the bereaved children be forced to sell their family home to pay for wasteful government.

        IHT is a nasty tax.

        1. uanime5
          September 10, 2012

          I stated in my post that the children will have to sell the family home and live with their relatives because they won’t be able to earn enough to pay for food and utilities. This will occur with or without IHT.

          1. Bob
            September 11, 2012

            @uanime5

            As I already said, it depends on the age of the children.

            Also, the size of the legacy.

  14. Alan Wheatley
    September 9, 2012

    As for “profitable work for the solicitors and accountants”, this is not just prior to death but in the administration of the estate thereafter.

    My advice is to make the beneficiaries the executors, as they have the greatest incentive to realise the greatest net value from the estate.

    Beware of the Capital Taxes Office, who I know from experience can have difficulty understanding the concept of “free market value at the date of death”.

    1. lifelogic
      September 9, 2012

      Indeed just the beneficiary as trustees very good advice. No one who charges huge fees they can get legal advice if needed and not be stuck with someone often over charging.

      1. lifelogic
        September 9, 2012

        Sorry “beneficiaries” I meant.

    2. lifelogic
      September 9, 2012

      Indeed best just to have the beneficiary as trustees – very good advice. No one who charges huge fees. They can take legal advice if needed and not be stuck with someone often over charging.

    3. uanime5
      September 10, 2012

      The problem with this is if the beneficiaries-executors squabble over who gets what there’s no way to resolve any problems without using the courts. It’s far better to have a neutral executor to try to resolve any problems simply because they won’t try to claim as much of the estate for themselves.

      1. Bob
        September 10, 2012

        @uanime5

        The executors don’t write the Will, they execute it!

        1. uanime5
          September 10, 2012

          I don’t know why you pointed that out since I never mentioned writing the will. I was referring to the distribution of assets among beneficiaries.

          1. Bob
            September 11, 2012

            @uanime5

            The instructions for distribution of assets among the beneficiaries are written in the Will.

            The executors don’t write the instructions they just execute them.

  15. Iain Gill
    September 9, 2012

    One problem is that this is another tax burden which only applies to the overtaxed middle layer of society. The folk in the rich list employ accountants and lawyers and use techniques such as trust funds, offshore companies, Swiss bank accounts and many others to minimise any amount they have to pay. The poorest folk pay little, and are incentivised to spend anything they get and not to save. Which leaves the middle layers to pay disproportionately.
    The rules are far too complex for multinational families too, when different members live in different countries which country should be getting which tax when is very difficult to work out.
    My own view is that direct inherited wealth is good, i.e. money left by someone who actually knew you and worked their socks off to leave to you is good, it’s the right incentive in the system. Wealth left through countless generations and originally gained by someone long dead before you were born is much more questionable.
    I would put a flat percentage tax payable across the board and regardless of tax avoidance techniques to reduce the admin needed for everyone.

  16. Bazman
    September 9, 2012

    It’s interesting to see how many on this site hold Switzerland to be a shining example of how to run a country, but at the same time want to pay no tax, have no employment regulations, or any other regulations and no social security. Switzerland like Germany is a quagmire of social mores and state regulation over private life and business with most of the populations spying on each other and reporting rubbish being put in the wrong bin cars dripping oil and hate for having more money than your social class allows. Like here Huh? Germany is a largely middle class society with foreigners doing the dirty work and desk jockeys getting high wages and benefits.
    What the fanastists are looking for is a German run cayman islands with middle class waiters and cleaners. Where they fit into their own fantasy is anyones guess? Ram it.

    1. lifelogic
      September 9, 2012

      “Switzerland to be a shining example of how to run a country” no I do not see it as a perfect shining example – but clearly far far better than the UK and it has some real direct democracy and is nearly twice as rich as a result.

      Why Cameron is so against a greater Switzerland I do not know – he will not tell us for some reason perhaps its the Toblerone – I am not keen on that either.

      1. Bazman
        September 9, 2012

        What about the absurd and pointless regulations?

        1. Richard1
          September 10, 2012

          I dont think you can ever have been to Switzerland. It has a strong direct democracy, a tradition of peace going back over centuries, has (according to the most recent survey) the most competitive economy in the world, is showing GDP growth and has a current account surplus despite having the world’s strongest currency, is home to some world class companies in different sectors etc. BTW, tax / GDP in Switzerland is over 10 % points lower than the UK and there is no deficit. We would do very well to look at Switzerland and implement some of the same policies.

    2. Max Dunbar
      September 9, 2012

      Give me German or Swiss “social mores” in preference to the British equivalent. There has always been snobbery here about those who are “in trade” or who get their hands dirty at work being somehow inferior to white collar types. The unwise pressuring of school leavers to go to university has been counter-productive in this country.
      It is untrue to accuse the Germans of not “doing the dirty work”. The Germans are industrious and all the tradesmen that I have seen there so far have been Germans who take care of their appearance as well as their skills. Being an engineer or craftsman in Europe generally carries higher status than here.

      1. Bazman
        September 9, 2012

        True at a price. A middle class price supported by middle class mores. Ram it.

        1. Lindsay McDougall
          September 13, 2012

          Most of us the expression ‘market price’ rather than ‘middle class price’. If you have workers’ prices, that is low prices ordered by the state, you get shoddy goods, long queues and empty shelves. Just get yourself an economic history of Soviet times – you don’t have to go as far back as Stalin; Khrushchev or Brezhnev will do.

          Then there was the triumph of Socialist planning of production, resulting in a huge surplus of industrial size concrete pipes – but you couldn’t get a bath plug.

    3. HJBradders
      September 9, 2012

      What a load of nonsense. Do you know how IHT is arranged in Germany? If someone dies and leaves 1 million to 1 child, the child pays IHT on 1 million. If 5 siblings are left 1 million, each pays IHT on 200,00. That seems to me to be a bit fairer the in the UK.

      1. Bazman
        September 9, 2012

        See above bradders. Nice one post by the way. Did you ram it?

        1. HJBbradders
          September 10, 2012

          Some of us have a job to do.

    4. uanime5
      September 10, 2012

      Sadly too many people believe that because Switzerland isn’t in the EU and is doing well economically that if the UK left the EU it would automatically become as prosperous as Switzerland. This is what happens when people assume that their favourite reason is responsible for all positive outcomes and don’t investigate why the positive outcome is occurring.

      One example of this was copying the Japanese practise of having employees discuss problems during work at the end of the day. This was believed to increase moral because it would make employees feel empowered but resulted in moral being lowered. When they interviewed the Japanese workers they found that they also had low moral but worked hard because the company gave them a job for life and good pay.

      1. Bob
        September 10, 2012

        @uanime5
        Over simplification again.
        Japanese, Swiss and British cultures are different.

        I would like to know why you think leaving the EU would be detrimental for our economy.

        1. uanime5
          September 10, 2012

          If different cultures are a problem then there’s no reason to assume that the UK will ever become like Switzerland no matter how much we copy them.

          Regarding leaving the EU the lack of employee protections would be a major problem because at the moment the Government is prevented from abusing employees due to EU law. A good example of this would be the Working Time Directive which was opposed by the main political parties because it prevented employers forcing employees to work long hours.

          Another problem with leaving the EU is that all UK products exported to the EU will be subject to additional taxation, just like products imported from the USA are subject to additional taxation in the EU. This will make the 53% of the UK’s exports sent to the EU much more expensive.

          1. Bob
            September 11, 2012

            @uanime5
            If different cultures are a problem then there’s no reason to assume that the UK will ever become like Switzerland no matter how much we copy them.

            Who said different cultures are a problem?
            I was implying that different cultures approach problems in different ways.
            Individualism is encouraged in some cultures and discouraged in others.

            Regarding leaving the EU the lack of employee protections would be a major problem because at the moment the Government is prevented from abusing employees due to EU law.

            Are you assuming that the British government would remove employee protection?

            Another problem with leaving the EU is that all UK products exported to the EU will be subject to additional taxation…

            Don’t worry about this.
            The EU export more to us than we do to them – so very unlikely.

  17. JimF
    September 9, 2012

    Allow inherited transfer into beneficiaries’ pension funds tax-free, and allow residential properties in pension funds. Put a very high limit on the tax advantages of pension funds, so there is a rake off there from the better off.

    Solve a good part of the future pensions issues, keep money presently in residential property therein, helping the housing market.

    1. outsider
      September 9, 2012

      Good idea JimF but you would have to be very careful about allowing residential property in personal pension funds. It was proposed a few years ago but had to be shelved when it was shown that this would subsidise “buy-to let” at the expense of first-time buyers.

      1. sm
        September 9, 2012

        Might be useful if its for the home you live in ( and you have no other property) and you are not letting any property?

        I would suggest a roof over your head is worth more than pension in terms of hierarchy.

        Otherwise – reduce the btl interest deductability advantage over owner/occupiers on property already built, btl with restrictions on newbuilds sold off plan – but only on say 25% of a new development.

        How about land value tax instead of IHT?

        If the money supply had been kept properly under control, house prices would not be so high. Indeed just let interest rates rise and the asset prices will fall and tax take also.

    2. Bob
      September 9, 2012

      @JimF

      More complexity?
      Oh joy!

  18. Nick
    September 9, 2012

    Double taxation should be made illegal.

    Taxation should be restricted to services. What services do you provide for the dead?

    1. Denis Cooper
      September 9, 2012

      The dead don’t pay IHT; they’re dead and own nothing and pay no tax on it.

    2. uanime5
      September 10, 2012

      Well if you die and are very poor you can have a pauper’s funeral.

  19. Matthew
    September 9, 2012

    I think that exempt transfers within the seven year rule should be replaced by a much more simple tax structure. Maybe by the reduction in the rate to 20%.
    As with most taxation the legislation is too long and too complex. I recall doing my accountancy exams in the late 70’s and reasonable funeral costs were allowable – but not the cost of a headstone (who thought that one up and why?) Went into industry so lost touch with this.
    The seven year rule is unfair it’s reducing the application of the tax to a game of chance that could be played in a casino.
    Some people got so pressured by the potential beneficiaries that they ended up making gifts too early. It later transpired that they needed the money for some purpose or other. They had worked on the basis that in extremis financial help would be forthcoming, only to be disappointed.
    Big family rifts frequently developed with children not speaking to their parents, or to each other.
    When I was in a position to advise some little old lady – I used to say forget about the seven year rule – it’s a Venus Flytrap – keep your money under your control just give away amounts that you can easily afford. Likewise stay away from trusts. Look at other ways such as insurance policies; get the potential beneficiaries to pay the premiums.
    (Perhaps one of the reasons that I went into industry so lost touch with this.)

    1. outsider
      September 9, 2012

      Dear Mr Redwood,
      Inheritance Tax is the most obvious case where a much lower tax rate would lead to a rise in the revenue take.

      The 40 per cent rate is so damaging for small and medium sized business, including farming, that wide exemptions have had to be made to stop it having a disastrous impact on the economy. So for many rich people it is voluntary and many distortions are created.

      Although Nick (at 0913 above) is right, a 10 per cent “tithe” with few or no exemptions and a modest tax-free amount would be hard to object to on pragmatic grounds and wealth could readily be restored within a generation.

      Such practical reforms cannot be made, however, unless there is cross-party consensus. That will not be forthcoming so long as so many people think that the purpose of the tax is to promote equality and punish the rich rather than to raise money for services “to the living”. Changing that would probably need a sustained public debate followed by a referendum.

      Barring that, JimF’s suggestion (at 0849 above) that free transfers be allowed into pension funds makes a lot of sense. It would cut revenue further but also cut future public spending.

      1. outsider
        September 9, 2012

        PS. Sorry, meant to agree with Matthew.

    2. Cathy
      September 9, 2012

      Too true – my mother was pressured into giving away significant amounts of money as my brother, he needed it urgently to buy a bigger car, had got her into a flap about IT, all my money is going to the tax man and the seven year rule was mooted.
      The car £60,000 devalued was sold for £15,000
      Mother needed some money as her pension was less than she’d thought.

      1. Bob
        September 10, 2012

        @Cathy
        A good reason to support the abolition of IHT.

        At the very least, the nil rate band should be set to £1m, and increased at the rate of inflation to protect the aspirant middle classes.

  20. Acorn
    September 9, 2012

    While you are considering IHT, I would put SDLT and CGT all in the same bucket. They are supposed to raise 3.0; 6.4 and 3.8 billion pounds respectively this year. Did you spot that Osbo jacked up the £2 million residence SDLT rate to 15% for “certain non-natural persons”. A sort of one-off bit of a mansion tax, me thinks.

    The government gets £26 billion from Council Tax (0.6% of residential property value per year); and, £26.5 billion from Business Rates (4.8% of commercial property value). You could do away IHT; SDLT and CGT and add them to the former two. Particularly if Council Tax bands were extended pro-rata, such that a £2 million pound mansion was paying 0.6% CT instead of less than 0.13% currently.

    Land Value Tax (LVT) would be even better because practically all of these taxes in some way, are clawing back gains on land prices. Remember, there are only two things really worth owning, land and knowledge.

    1. Bob
      September 9, 2012

      @Acorn
      I’d much prefer that any reduction be paid for by a corresponding reduction in government spending squandering.

  21. forthurst
    September 9, 2012

    The rules on gifts are in my experience are a hugely timewasting nonsense since they are not supported by any enforceable rules to ensure that contemporaneous financial records exist to explicitly identify or validate them. Therefore, in retrospect, it can be extremely difficult to establish that such gifts were made exclusively from income or to whom they had been made nor is there any obligation on putative beneficiaries either to be co-operative or maintain records or even remain extant, nor that banks and other authorities are obliged to be co-operative in supplying duplicate records. Therefore the difficulty in identifying the destination of a sum of money paid out of a bank account several years ago can be significant. Was it a bill, a gift, a transfer or what? Other noteworthy aspects of acting as an executor to a private estate were the ease of setting up a trust to mitigate CGT and the difficulty of obtaining a refund and court fees out of BG.

    I take it that the seven year rule is the theoretical time horizon of official record keeping; however, an elderly person may have all their income taxed at source and not bother about record keeping at all whilst continually moving money to obtain better rates of interest. Tax authorities may need the right to excavate peoples’ tax affairs but creating potential retrospective liabilites going back several years for individuals on such a basis is wholly unreasonable.

  22. English Pensioner
    September 9, 2012

    We are putting some money aside each year for our grandson, in his name, from our annual allowance, which will ensure that the sum is tax-free.
    One of the big problems is that he will get it at eighteen, which in our view is far too young, as, if he is like his father, he will probably spend the lot on a sports car, rather than further education which is our hope.
    Our solicitor, tells us that it is possible to write a trust deed for some later age, but the cost could be a significant amount compared with the total involved. One suspects that he has written dozens of these previously, and only needs to change the names of the trustees and beneficiaries, but nevertheless the cost seems outrageous!
    It strikes me that the main beneficiaries of estate duty, apart from the government, are solicitors and accountants who make money at all stages. We need considerable simplification of all our tax laws so that they can be understood by ordinary people without the need to pay professionals to manage our tax affairs.

    1. Bob
      September 9, 2012

      @English Pensioner

      Absolutely right, accountants and lawyers thrive on the complexity of the tax regulations. We pay the tax man’s wages to tax us and the tax advisor’s wages to defend us against against the tax man.
      A very unproductive state of affairs.

      1. lifelogic
        September 9, 2012

        Indeed cut out the parasitic activity when ever possible by simplification and reduced regulation.

    2. Bazman
      September 9, 2012

      Same problem with the child trust fund at eighteen, the money legally belongs to them. Eighteen and eighteen grand! whaaaaay! Seriously it’s not that it will be taken off them, but how is the worry.

      1. lifelogic
        September 9, 2012

        Indeed the child trust fund – an insane idea from the save the world genius Gordon Brown what a t*****.

  23. Bazman
    September 9, 2012

    I’ve just read that many companies are starting to put in back up systems for their power supplies as they do not trust the grid in supply or quality of supply. OK for a kettle and a toaster, but complex electronics like computers apparently not. The Olympics had an number of back up supplies and the options to take power from other parts of London. So much for privatisation of the billing companies, but puts the responsibility back on the person using the energy. Should I buy a generator? They are quite cheap these days.

    1. Robert Christopher
      September 9, 2012

      This post does not, at first glance, appear to have anything to do with Inheritance Tax, but I will still comment!

      Many companies have had back up systems for their power supplies for many years as this would be part of their security policy. It would be a dereliction of duty on behalf of company directors if this were not the case.

      The reason that many more companies are doing this is, I expect, because they can see that the risks are increasing, and will increase still more, because of previous governments’ and this government’s mad climate change policies, more properly called global warming (for which there is still little if any evidence) and windmills (the concrete sort, for which there is too much evidence).

      They still do not understand that, when wind power contributes more and more to the national grid (>10% is a good figure to have in mind), not only does power instability become a risk that needs to be addressed, but that the electricity generated by wind power, when the wind blows, actually generates more CO2 than if it had been generated by gas alone.

      1. Robert Christopher
        September 9, 2012

        That last sentence should read: “… but that a promised supply of electricity, generated by wind power when the wind blows, and other means such, as gas, when the wind does not blow, actually generates more CO2 than if it had been generated by gas alone.”

      2. Bazman
        September 9, 2012

        This is one of the main causes of the electrical instability and is government policy. Before you start have I ever said I am in favour of solar and wind power. No I have not. I am in favour of sustainable clean energy sources. What? That is the problem. Nuclear certainly ain’t cheap or clean.

      3. sm
        September 9, 2012

        CHP is also very efficient, generating heat and electricity which can be sold into the grid, adding a revenue stream as well as mitigating risk.

    2. oldtimer
      September 9, 2012

      This problem (of costly interruprion to the electricity supply) has already occurred in Germany. You should blame the Climate Change Act and the obsession of politicians with wind farms and solar energy schemes (not the billing arrangements). These do not provide uninterrupted supply, only intermittent supply. Alternative fossil-fuelled back up is necessary (usually gas fired generators on standby) to kick in when the wind or the sun fails. This causes the damaging interruptions.

      A back up generator would be a smart move provided you know how to connect it to your mains circuit, you are aware of the safety implications for you, your family and for the staff of your electricity supply company.

      1. Bazman
        September 9, 2012

        Darling we have an Aga that generates electricity too. Marvellous! Everyone should have one. Much more practical than a smelly, noisy generator with fuel stored in a wheelie bins and milk cartons in your garage or kitchen. Runs on anything even electricity. The cat loves it.

        1. APL
          September 9, 2012

          Bazman: “Darling we have an Aga that generates electricity too.”
          Bazman: “Runs on anything even electricity.”

          Cool, that’s quite some aga you got there.

  24. Alte Fritz
    September 9, 2012

    IHT is really a continuation of estate duty (born 1894) with a tax on lifetime transfers added in 1975. For old money and those with enough to afford good planning, it is a largely voluntary tax. It raises around £2.2bn. It is time to think what is the rationale of this and other capital taxes.

  25. Sir Richard Richard
    September 9, 2012

    I’ve already spent money on an accountant to make sure the government doesn’t get any money.

    You work hard to get a decent wage (government steals some of your money), buy some property with it (government steals some of your money here) and then the government wants to take some of the money you leave to your children? No chance.

  26. David Langley
    September 9, 2012

    We should be able to keep our assets from the taxman. The old days are now gone and the landgrabbing wealth grabbing aristocracy has been dealt their death blows. The modern money is safe from the taxman. Its only the peasants who are punished in the main by this tax. By the way it appears that the Tory party is about £5.5M in negative equity. Would you trust a bunch of losers who cant make enough dough to run their party. I know the UKIP is light too but should be able to stump up enough to break even this year. Our rulers have no clothes, but moan about us who have worked hard to buy our homes and leave something behind us to at least give our kids a kick start. Who are they to tell me how much I can leave before they steal it?

  27. Lindsay McDougall
    September 9, 2012

    I seem to remember George Osborne promising to raise the Inheritance Tax threshold to £1 million. Maybe that was just pre-election Party Conference rhetoric. Party Conferences are such silly jamborees, led by cheer leaders and fawning to the current leader.

  28. Neil Craig
    September 9, 2012

    I feel that of there is a justified tax this must be a top contender. By definition the people losing out did not earn the money.

  29. Epigenes
    September 9, 2012

    Scrap it.

  30. Bert Young
    September 9, 2012

    I have said at least twice before , get rid of direct taxation – be it on income , accumulated wealth et al . Indirect taxation on all purchases is the most sensible (and palatable) method . Every year the taxation rule book grows , causes confusion and delusion ; it inhibits growth and places an enormous burden on the community . Things do not get better when they are more complicated – bureaucracy thrives on it . I have made a bob or two and I have no intention of letting any government laying its hands on it ; what I’ve got I’ve worked hard for – my parents left nothing to me . Enterprise should be encouraged and not in any way inhibited by tax .

    1. uanime5
      September 10, 2012

      Indirect taxation will only work in VAT is raised to 60-70% and there isn’t a black market.

    2. Lindsay McDougall
      September 10, 2012

      In case you haven’t noticed, VAT rates are fairly complicated too. Both income tax and VAT could be considerably simplified.

      Income tax: rates 0%, 20%, 40%
      Thresholds: £10,000 and £50,000
      Exactly the same for pensioners

      VAT: End all zero rating and exemptions, replaced by a 5% rate
      Ensure that 5% and 20% are the only VAT rates in use
      Does car tax still exist? If so, abolish it
      Get rid of stamp duty and replace it by a 5% VAT rate on construction

      Can’t you just see the P45s of the displaced bureaucrats?

  31. Christopher Ekstrom
    September 9, 2012

    A vivid illustration of the pathetic state of Torydom: inheritance tax is double taxation. Just because one passes away the Leviathan takes your money? Serfs.

    1. uanime5
      September 10, 2012

      VAT is also a double taxation, do you want it banned as well?

  32. Bernard Juby
    September 9, 2012

    Under the Code Napolian the French made a dogs’s breakfast of Inheritance laws often making the surviving spouse sell the family home because they could not afford to pay a sibling their share. We must never get into that situation so any tax relief of famiy homes is welcome. Inflation is always a result of Government action so they should FULLY recompense for their meddling!

  33. Michael Read
    September 9, 2012

    KISS. Meaning put the threshold up to £400,000 or £800, ooo for a couple.

    One suspects – no, we know for certain – that the £325k/650k is kept because it’s a neat, politically painless theft by the state on the citizen’s property.

    Ditto, the seven-year taper relief on gifts. The state’s way of having the last laugh and inscribing its epigram on your coffin: “Yup, the bastards got you in the end”

    1. uanime5
      September 10, 2012

      How will raising the threshold simplify the tax system?

      1. Bob
        September 10, 2012

        @uanime5
        “How will raising the threshold simplify the tax system?”

        It simplifies it for anyone whose estate falls within it, and that would be a lot of people.

        £1m would simplify it for even more people.

      2. Lindsay McDougall
        September 10, 2012

        Slight change of subject. The Left want a wealth tax and/or a mansion tax. What is the objection to simply splitting the top Council Tax band into two or more bands? After all, Council Tax already exists so a new tax is not needed. I take it that you don’t actually like creating new taxes – correct me if I’m wrong. Incidentally, stamp duty at 7% isn’t that far from a mansion tax, is it?

        1. uanime5
          September 10, 2012

          I think the main different is where the money goes. I believe additional Council Tax will result in extra money going to Local Councils but a wealth/mansion tax will go to directly to the treasury. It’s difficult to assess which will be better overall.

          The difference between council/wealth/mansion tax and stamp duty is that the former are paid annually while the later is only paid when the property is sold. So you’re more likely to get the former than the latter every year.

  34. Jon
    September 9, 2012

    How many people would stop developing their businesses if they thought the taxman was going to take it. Lowering the threshold would be anti aspirational.

    Its not that long ago that inheritance tax was something only the very wealthy experienced. They could afford the advice.

    The soon to be enforced Retail Distribution Review is a measure in a long line of measures with the outcome that removes the affordability of advice from Joe or Josephine Bloggs.

    The issue is two fold, complex IHT Tax mitigating rules designed for advice with the threshold moving down to the more average financed person (South East). Second removing the ability for the average to afford in cash financial advice (RDR).

    It is the second point that has had a far more damaging an impact. What used to be common place in people getting financial advice which resulted in many having savings and pensions, has resulted in the total amount saved remaining static for about 15 years . The demographics of that same amount saved has also changed in that the static savings/pensions amount is more greatly made up of those more wealthy who could afford advice.

    That led to panic against an aged population and the NEST/compulsory pension contribution to be enforced whether a business can afford it or not.

    Yes IHT could be simplified but that is not the issue really. We could do with returning to a situation where everyone has access to financial advice. The funding for which was paid for by the large providers spreading that cost over 10 to 20 years but paying the small to medium sized adviser upfront as they don’t have the means to spread their cost over a dozen years to break even.

    Ed Milliband criticised a fund manager for charging higher than average management charge. He labelled them the “predator”. The customers for that particular fund are only those who had professional advice, the more wealthy under the system as it is who can afford it. They benefited from an 88% return over the last 5 years, minus the charge would still be over 70% which Milliband didn’t mention. Ordinarily money invested in 2007 has not done too well.

    Return us to a situation where everyone can get advice, its a much bigger issue than just IHT.

    RDR is with the second chamber, a Labour anti aspirational concoction that says “not for you lad” only for the wealthy. We used to have well funded savings and pensions as a country, the FTSE was well funded as a result funding the growth. The FTSE needs shareholders, not bank loans, it the SME’s that need the loans.

  35. MickC
    September 9, 2012

    The Tories have always said they will abolish Inheritance Tax. They never have and never will.
    People create wealth to benefit their families. Once this is discouraged (and it has been) expect fewer people to work hard to create wealth.
    The sensible way is just to get the entitlement from the state-heaven knows we pay enough for it.
    Incidentally, the Tories will never again form a government, so I’m afraid discussing what should be done is pointless.

    1. Max Dunbar
      September 9, 2012

      Beneficiaries can be put in the position where they have to borrow money to pay IHT in order to be able to accept the assets bequeathed to them.

    2. lifelogic
      September 9, 2012

      “Incidentally, the Tories will never again form a government, so I’m afraid discussing what should be done is pointless.”

      You could well be right.

    3. BobE
      September 9, 2012

      “Incidentally, the Tories will never again form a government”

      I agree, at least not for another three terms. ( However there’s a Boris stalking horse about !).

    4. Bob
      September 9, 2012

      @MickC
      ““Incidentally, the Tories will never again form a government, so I’m afraid discussing what should be done is pointless.””

      It’s looking that way.
      They need to split and allow the likes of Cameron, Clarke and Teresa May to join the Lib Dems and the real conservatives like John Redwood to join UKIP. Then we will see some clear blue water.

  36. Barbara Stevens
    September 9, 2012

    I’ve nothing against people not paying IHT at all, but what I do object to is the never ending punishment against the disabled and the sick. To get help many have to almost beg for help, while, this government inparticular, gives foreign aid by the billions. That is immoral and a policy that any 21st century country should be ashamed of. It is after all OUR money not MPs money or governments. We pay taxes to protect and run this country not foreign ones. If people make money or inherit it, I’ve no complaints, they are welcome to it and good luck to them; but when it comes to abusing the sick and the disabled by cutting their benefits, which this government is doing, that is wrong. If you are strong enough to work, that’s different, you should do so, but jobs should be there for people to apply for them.
    I’ve no quarrel with the ‘rich’ in our society, but to cut taxes for the well off at the expense of those who are sick is against all our countries principles, and any party who proposes, enacts such policies deserves to be sent into oblivion, the Tory party have a strong chance of being given that sentence if they carry on with their aims against the sick and disabled.

  37. The Prangwizard
    September 9, 2012

    Buy gold, buy silver, buy diamonds, buy small art.

  38. Bill
    September 9, 2012

    It may be better to go to live elsewhere. I met a man whose (great)grandfather walked behind the wagons to the Californian gold rush of 1848 and onwards. He had struck rich and made enough money to buy 100 acre farms for each of his ten grandchildren. They still own those farms. Would than happen in Britain? No.

    1. uanime5
      September 10, 2012

      Well it would be more difficult to purchase 1,000 acres of land in the UK.

      Given that there’s no IHT on a working farm I don’t see why 10 grandchildren wouldn’t be able to own 10 farms, even if they inherited them.

      http://www.hmrc.gov.uk/inheritancetax/pass-money-property/iht-reliefs.htm#2

  39. NickW
    September 9, 2012

    Make it a flat rate tax of 10%, not on the estate but on the recipient.

    Even a flat 5% might produce more revenue than at present.

    Most people would not object to that; an inheritance is after all, additional money that you would not otherwise have.

    Tax is unfortunately a necessary evil, it should be as simple as possible and levied at a rate which maximises revenue.

    1. Bob
      September 9, 2012

      @NickW
      It should be used to fund the necessary functions of government, not as a tool of social engineering.

  40. wab
    September 9, 2012

    Any discussion of IHT needs to consider who pays for long term care. The current system is in effect for many people a draconian near 100% tax, which then of course leaves no worries about IHT.

  41. Rebecca Hanson
    September 9, 2012

    Please spare a though for my friends tonight who are living in temporary hostel accommodation because their family home (which they owned) has been sold to pay for the medical care of their mother (due to them not having owned it for long enough before she went into care). Baby is due in a few weeks. Let’s hope they get a council house by then.

    The other dimension to the inheritance lottery is, of course, whether or not a person needs residential care. If they do need substantial care you get nothing and if you share a home with them you lose your home.

    1. Iain Gill
      September 10, 2012

      bit like prescriptions and college fees this only applies in England

      we are living in a parallel universe where we fund the rest of the planet but get a raw deal ourselves

      1. Rebecca Hanson
        September 10, 2012

        My friends is in Scotland.

    2. Bob
      September 10, 2012

      @Rebecca
      Without that money going into public coffers, the government wouldn’t be able to increase it’s foreign aid donations.

      Doesn’t it make you feel better when you consider that aspect?

    3. Lindsay McDougall
      September 10, 2012

      If you insist on living in your own home (with support) as long as possible, then take a one way ticket to Switzerland, you don’t have these problems. The other thing you can do is to refuse an annuity as long as possible. The rates they pay out don’t allow for people taking control of their own death.

      1. Rebecca Hanson
        September 10, 2012

        What if you’re not in a position to insist on such things Lindsay or very rapidly and unexpectedly get to a state where you can’t be cared for at home and can’t make decisions like going to Switzerland, as was the case here?

        1. Lindsay McDougall
          September 11, 2012

          Decisions like that have to be made years ahead in a living will. If you want control of your life (and death) you need to do this and disseminate your wishes to those who need to know. Do you not realise that there is a whole army of doctors, nurses and carers who want as many elderly people to become ‘things’ as possible, so that they can maintain and extend their employment? And if you dare to defy them, they will bully you, certify you or seek to have a relative take Power of Attourny over you. Believe me, it happens.

          Do you think that the old lady you refer to wanted her son and daughter to lose their home? No, of course not. Had she seen it coming in time, she would have taken decisive action but she didn’t. I’ll wager that there is now some officious sod in the background telling her that she’s GOT to go into care and that Switzerland is not an option.

          I won’t deny that it is easier to take my attitude if you’re an atheist. Yet another reason for ditching religion.

          If you want a good cause to campaign for, why is it necessary to go to Switzerland if you want to manage your own death?

          1. Lindsay McDougall
            September 12, 2012

            Still awaiting moderation?

  42. Francis Irving
    September 9, 2012

    People live so long now, I’m baffled by why anyone minds inheritance tax.

    Most likely, by the time I inherit, I’ll be an old man anyway. I can’t rely on any such inheritance, say to house a family of my own, as it would come too late. I can’t even rely on it to form part of my pension, as you can’t guarantee to inherit anything.

    I’d much rather have 100% inheritance tax (not possible, alas for practical reasons), and a considerably reduced income tax. Reduced income tax is predictable money for me when I’m young and can use it. Not completely random money when I’m old, which is what a low IHT gives me.

    1. Tom William
      September 10, 2012

      When you have children of your own you might not feel this way – I hope.

  43. John Hill & Co
    September 9, 2012

    Mr.Redwood, I am glad that you have not forgotten the Chancellor’s electoral promise. Inheritance tax is a pernicious tax which destroys the country’s capital stock and uses it for current consumption in the form of government spending. If more inheritance was left in the hands of the people, it would provide the seedcorn capital for all sorts of new enterprises.

    Also, as you rightly point out, the incidence of the tax can be arbitrary, depending on the chance of living seven years after making a substantial gift to one’s heirs.

    The promise of a £1million threshold should without doubt be in the Conservative manifesto again at the next election – we know it would be popular.

    You mention taper relief – the way this operates should be reviewed. At present, if I make gifts of less than £325,000 within seven years of death, then my estate gets no benefit from taper relief. It only benefits the very rich who give away more than £325,000 and then die within seven years. A simple adjustment to the rules of how taper relief operates could benefit many more middle class people, who make more moderate gifts but then have the misfortune to die before the seven years time limit is up.

  44. uanime5
    September 10, 2012

    I feel that IHT is a good thing as it prevents the creation of a wealthy elite that not only have the wealthy they’ve earned but the wealth from several previous generation as well. These wealthy elite are always bad for the economy because they will distort it for their own benefit.

    While I’m unsure if the length of the 7 year rule is correct I can see the logic behind it as it prevents someone from giving away all their property shortly before they die in order to avoid paying IHT.

    1. Bob
      September 10, 2012

      @uanime5
      “I feel that IHT is a good thing as it prevents the creation of a wealthy elite”

      These wealthy elite are always bad for the economy

      Can you provide us with an example?

      1. uanime5
        September 10, 2012

        Burma.

        You tend to have very little innovation and economic growth when the country is ruled by a wealthy elite and the majority of the population live in poverty.

        1. Bob
          September 11, 2012

          @uanime5
          “Burma”

          No, I meant can you provide examples in Britain.

    2. Richard
      September 10, 2012

      Actually Uanime5, your hated “wealthy elite” dont pay very much IHT as they can afford to pay for top advisors and can afford the costs of seting up complex trusts and other off-shore avoidance schemes.
      Most IHT is paid by quite ordinary people who happen to live in a house worth a fair bit and/or they die prematurely without making “proper arrangements”.
      So IHT as a method of killing off all the very rich doesnt work.
      Sorry to disappoint you!

      1. uanime5
        September 10, 2012

        As long as it prevents a family from constantly inheriting the wealth of all previous generations it’s partially effective.

        1. Richard
          September 11, 2012

          uanime5
          Wow , your real and bitter envy of any families who are better off is shining through your post.
          Confiscation of wealth by the state on death…mmm, that would be a really popular election policy for Milliband and Co.
          Families seeing money they have managed to build up, stolen off them and given to the State.
          Why not just save time waiting for your hated elite rich to die and get building some guilloutines.

  45. Tom William
    September 10, 2012

    If it is not “morally repugnant” to give large sums of money away more than seven years before you die, why is it “morally repugnant” to do so in your will? Or is it just “morally repugnant” to have large (the figure to be defined by politicians) sums of money?

  46. Robert K
    September 10, 2012

    IHT should be scrapped – it’s a tax on inflation and on that which has already been taxed

  47. Robert Taggart
    September 10, 2012

    This middle-aged scrounger be looking forward to his c.£250K windfall !

  48. eric Blackman
    September 10, 2012

    I am 90 years old. Left school at 15 to join father in shop he had just bought after his
    32 years in employment. Spent 5 years as volunteer RAF motor boat crew ASR
    Returned to shop after war. Built business with father and after his death to 12 shops.
    Sold out when trade changed. Retired invested my money at 6%. Credit crunch put
    my two sons out of work. Reduced bank rate lowered my income drastically short
    of income despite 40% war disability pension from RAF. Sold house (no mortgage)
    Loaned most of the proceeds to sons who have started new business. Not enough left to attract IT. A pleasure to read comments in seraph font.

  49. Monty
    September 10, 2012

    uanime5
    Posted September 10, 2012 at 1:00 am | Permalink
    I feel that IHT is a good thing as it prevents the creation of a wealthy elite that not only have the wealthy they’ve earned but the wealth from several previous generation as well.
    ———–

    Why shouldn’t they? And what moral claim do you reckon you have on the wealth of another man’s ancestry?
    Are there any other aspects of life where you seek to usurp the natural rights of other people, on the grounds that you consider them undeserving of their good fortune? If another diner in a restaurant is served with a dinner that looks more appealing than your own, do you run over to his table brandishing a knife and fork to assert your superior moral claim to his haddock and chips?

    1. Bazman
      September 13, 2012

      He is saying that it is a progressive tax which is a difficult argument to deny and why should someone who has hundreds of thousands of pounds given to them not pay tax on it? They do if they earn it..

      1. Richard
        September 14, 2012

        Because Bazman, it is money that has had tax paid on it once already, when it was income or a capital gain built up by the deceased during his or her lifetime.
        And when the recipient spends or invests their legacy, tax will be paid yet again.
        I can understand taxes on spending, income and capital gains but to tax someone who has correctly paid their taxes during their lifetime, just because they have died, seems excessive to me.

  50. joel lerner
    September 21, 2012

    Inheritance tax at 40% is nothing less than neo Stalinist state conviscation and is a strong disincentive to investment in this country

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