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Source: (consider it)
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Thread: Inheritance Tax
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Adeodatus
Shipmate
# 4992
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Posted
I think it's a pity that whoever spent their lives building up a hoard amounting to £15million didn't put it to good use while they were alive. I may be doing them an injustice, of course: perhaps the £15million was what little was left of the untold millions they spent feeding and clothing the poor. But I doubt that, and you're welcome to call me cynical.
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"What is broken, repair with gold."
Posts: 9779 | From: Manchester | Registered: Sep 2003
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Arethosemyfeet
Shipmate
# 17047
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Posted
Of all the problems with the tax system, the fact that a few enormously wealthy people might be slightly less enormously wealthy is not high on my list of priorities. Come back when we have covered the costs of supporting the elderly, disabled and unemployed, paying for decent education and healthcare for all and reduced the iniquitous rate of VAT.
For now, if people want to live in their family home when their parents die they need to spend the preceding decades saving, or buying a property that they can sell to pay the inheritance tax.
I say this with full confidence that I, like everyone else in my family and the vast majority of the population, will never be affected by inheritance tax. I am, however, affected by income tax, national insurance and student loan repayments that give me a higher marginal tax rate than someone on 4 times my salary, and certainly higher than the rate on inheritance tax. If someone pays you goods in kind while you're alive, you have to pay tax on them. Inheritance should be the same.
Posts: 2933 | From: Hebrides | Registered: Apr 2012
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Mere Nick
Shipmate
# 11827
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Posted
quote:
Originally posted by Adeodatus:
I think it's a pity that whoever spent their lives building up a hoard amounting to £15million didn't put it to good use while they were alive. I may be doing them an injustice, of course: perhaps the £15million was what little was left of the untold millions they spent feeding and clothing the poor. But I doubt that, and you're welcome to call me cynical.
To build up a hoard like that strongly suggests, if not indicates, that one has produced more than he has consumed.
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"Well that's it, boys. I've been redeemed. The preacher's done warshed away all my sins and transgressions. It's the straight and narrow from here on out, and heaven everlasting's my reward."
Delmar O'Donnell
Posts: 2797 | From: West Carolina | Registered: Sep 2006
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Crœsos
Shipmate
# 238
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Posted
quote:
Originally posted by orfeo:
quote:
Originally posted by Crœsos:
If high-priced physical assets were held to be tax-exempt I think we can easily foresee the development of a barter-like economy wherein people (especially those in high paying positions) are paid in cars or jewelry or other commodities. Why get paid in cash which will be taxed when you can get tax-exempt in-kind payments?
But I'm not suggesting the asset is entirely tax-exempt.
But that's the obvious implication of your standard that a tax which might conceivably require the liquidation of an asset is wrong. You can always find a few marginal cases where paying the tax will require selling an asset, regardless of whether it's taxation on an estate or capital gains or some other assessment.
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Humani nil a me alienum puto
Posts: 10706 | From: Sardis, Lydia | Registered: May 2001
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Albertus
Shipmate
# 13356
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Posted
No, Mere Nick, not produced, amassed. To illustrate the point: I am a successful professional gambler. By a careful knowledge of the laws of probability and by a shrewd sense of when my competitors are weak, I have amassed a fortune of £15 million. What have I produced?
Or more likely: I am a currency or commodity speculator, making my money on the difference between the price at which I can buy and sell dollars, uranium or pork bellies. In the case of commodities I do not use them, finance their production or arrange their distribution: I buy them to sell them again when the price has risen (perhaps because I and those like me have cornered the market and so driven up prices- the the higher prices are not going to the producers). I have amassed a fortune of £15 million in this way. What have I produced?
[ 22. August 2013, 16:41: Message edited by: Albertus ]
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My beard is a testament to my masculinity and virility, and demonstrates that I am a real man. Trouble is, bits of quiche sometimes get caught in it.
Posts: 6498 | From: Y Sowth | Registered: Jan 2008
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
quote:
Originally posted by Adeodatus:
I think it's a pity that whoever spent their lives building up a hoard amounting to £15million didn't put it to good use while they were alive. I may be doing them an injustice, of course: perhaps the £15million was what little was left of the untold millions they spent feeding and clothing the poor. But I doubt that, and you're welcome to call me cynical.
You make it sound like one buys a castle one brick at a time, or perhaps one bedroom at a time.
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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Adeodatus
Shipmate
# 4992
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Posted
quote:
Originally posted by orfeo:
quote:
Originally posted by Adeodatus:
I think it's a pity that whoever spent their lives building up a hoard amounting to £15million didn't put it to good use while they were alive. I may be doing them an injustice, of course: perhaps the £15million was what little was left of the untold millions they spent feeding and clothing the poor. But I doubt that, and you're welcome to call me cynical.
You make it sound like one buys a castle one brick at a time, or perhaps one bedroom at a time.
Not really. I imagine one hoards sufficient money that one can keep it in barrels and occasionally roll in it for fun; then one buys the castle.
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"What is broken, repair with gold."
Posts: 9779 | From: Manchester | Registered: Sep 2003
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Curiosity killed ...
Ship's Mug
# 11770
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Posted
Or in the case of those big estates, making money in "interesting" ways.
The local manor house was owned by the local abbey until dissolution when Henry VIII took it over as a hunting lodge. Mary used it while Edward VI was on the throne. Elizabeth I granted it to one of her courtiers, followed by his successors until sold to someone who made his money in the slave trade in the 1750s. In Victorian times the new owner made his money building railways and/or factories. All lovely clean industries with no ethical concerns at all.
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Mugs - Keep the Ship afloat
Posts: 13794 | From: outiside the outer ring road | Registered: Aug 2006
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leo
Shipmate
# 1458
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Posted
quote:
Originally posted by aumbry:
quote:
Originally posted by leo:
Like Marvyn, I think inheritance tax is deeply unfair and unjust.
As a leftie, i might be expected to applaud the redistribution of wealth but it hits the poor as well as the rich.
true, I had tax reduction when paying my mortgage but i was still paying all the other taxes. Then it all gets taxed again upon my death.
More twaddle.
I would be interested to see an illustration of how inheritance taxes hit the poor. But lets take an example. I think it would be reasonable to say that in Britain the poorest first time buyer on the housing ladder would probably be able to stump up about £100,000. To pay tax of £100,000 on an estate would require the property inherited to be worth either £575,000 if inherited from an unmarried individual or £900,000 from the survivor of a married couple.
Well, I paid £26K for my place in 1980. I inherited £6k for a deposit. My mortgage was 2 1/2 times my salary and was repaid at £25 per week and I could not afford to furnish it without HP.
So a lot of my earlier life was scrimping and saving.
Why should the government cream off a large amount of what i had to work hard for?
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My Jewish-positive lectionary blog is at http://recognisingjewishrootsinthelectionary.wordpress.com/
My reviews at http://layreadersbookreviews.wordpress.com
Posts: 23198 | From: Bristol | Registered: Oct 2001
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
quote:
Originally posted by Crœsos:
quote:
Originally posted by orfeo:
quote:
Originally posted by Crœsos:
If high-priced physical assets were held to be tax-exempt I think we can easily foresee the development of a barter-like economy wherein people (especially those in high paying positions) are paid in cars or jewelry or other commodities. Why get paid in cash which will be taxed when you can get tax-exempt in-kind payments?
But I'm not suggesting the asset is entirely tax-exempt.
But that's the obvious implication of your standard that a tax which might conceivably require the liquidation of an asset is wrong. You can always find a few marginal cases where paying the tax will require selling an asset, regardless of whether it's taxation on an estate or capital gains or some other assessment.
The gap between 'might conceivably/a few marginal cases' and 'seems quite likely to cause' is a very large one.
And I can't think of any other situation where a tax might force the disposal of an asset immediately upon its acquisition. Not least because half my point is that if one is consciously acquiring an asset, one is almost certainly not going to do that if one can't bear the associated taxation costs - because it would be a colossal waste of money to buy something, pay tax on it and immediately sell it without enjoying any benefits of the item.
From what Adeodatus said, it appears the tax rate in the UK is... 40%? It's simply far too high in my opinion. That paper tells me that Australia's peak was 27% (it also says the USA got up to 77%, which is shocking). Perhaps it was easier to get rid of in Australia because it didn't bring as much money in and consequently our governments didn't become addicted to the easy pickings. And it is easy pickings. Everybody dies.
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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Curiosity killed ...
Ship's Mug
# 11770
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Posted
UK Tax rates
Generally - £9k untaxed
20% tax on taxable earnings to £35k
40% tax on taxable earnings from £35k to £150k
50% tax on taxable earnings over £150k
Also National Insurance -
12% between £149 and £797 per week
2% for earnings over £797
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Mugs - Keep the Ship afloat
Posts: 13794 | From: outiside the outer ring road | Registered: Aug 2006
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would love to belong
Shipmate
# 16747
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Posted
I bought my first place in 1989, aged 32, which was late for my age group. Price was £49k which I financed from an inheritance and balance of £30k was a mortgage loan. By April 1990, less than a year after I bought, the mortgage interest rate was at 15.4% and I was panicking. But stuck in and managed to survive. Moved up market a bit in 1993. By 1998, I had paid off the mortgage capital, and have been mortgage and rent free ever since. Best thing I ever did financially, although I spent the years 1989 to 1998 in frugality. Oh, and I also contented myself and didn't seek to move upmarket again. Never borrowed a penny since paying off the mortgage. Don't know what the future holds, but I hope to die with no debt.
[ 22. August 2013, 17:04: Message edited by: would love to belong ]
Posts: 331 | From: Lost and confused | Registered: Oct 2011
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
That doesn't look to be the relevant kind of tax.
[cross-post, responding to CK]
[ 22. August 2013, 17:03: Message edited by: orfeo ]
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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no prophet's flag is set so...
Proceed to see sea
# 15560
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Posted
quote:
Originally posted by Mere Nick:
quote:
Originally posted by no prophet:
We don't have inheritance per se in Canada, but we do have capital gains tax. Thus: house bought 40 years ago for 130K might sell for 650K today, 520K would be the capital gain and that is taxed because owned property is deemed sold the day the owner dies.
Do the heirs get some of that 520k tax free? Here the estate sized I mentioned earlier can pass estate tax free and the beneficiaries also get a step up in tax basis to the fmv.
I think 50% of it is untaxed or something. Not completely sure.
It is completely possible to have life insurance bypass an estate. Mine does. The best to buy on property, i.e. to defer the taxes is second to die. Thus if the property is deemed sold only when the second spouse dies, then the life insurance pays. Best meaning cheapest, which is not exactly cheap.
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Out of this nettle, danger, we pluck this flower, safety.
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Posts: 11498 | From: Treaty 6 territory in the nonexistant Province of Buffalo, Canada ↄ⃝' | Registered: Mar 2010
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Penny S
Shipmate
# 14768
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Posted
I seem to remember there was something about when IHT should be paid with regard to the granting of probate which didn't seem to make sense - surely it can't be that the tax must be paid before there is access to any monies?
Posts: 5833 | Registered: May 2009
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Crœsos
Shipmate
# 238
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Posted
quote:
Originally posted by leo:
Well, I paid £26K for my place in 1980. I inherited £6k for a deposit. My mortgage was 2 1/2 times my salary and was repaid at £25 per week and I could not afford to furnish it without HP.
So a lot of my earlier life was scrimping and saving.
Why should the government cream off a large amount of what i had to work hard for?
It won't. It will just cream off from your heirs a large amount of what they didn't have to work hard for.
quote:
Originally posted by orfeo:
From what Adeodatus said, it appears the tax rate in the UK is... 40%?
The marginal tax rate on inheritances is 40% in the UK. Pretending marginal rates are total rates is a rhetorical/mathematical trick. An estate only pays 40% of the value above the exemption (£650,000 for an estate left by a married couple, £325,000 for a single person's estate). So if you inherit an estate worth £800,000 from your (married) parents the £60,000 tax bill is an effective rate of 7.5%. It's only when you get estates an order or two of magnitude larger than the exemption that the effective rate approaches 40%.
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Humani nil a me alienum puto
Posts: 10706 | From: Sardis, Lydia | Registered: May 2001
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
Croesos, I wasn't 'pretending' anything. I was merely going on the figures provided by another Shipmate, which was that a 6 million pound bill meant a 15 million pound asset. I can see NOW that this isn't strictly correct.
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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Touchstone
Shipmate
# 3560
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Posted
A dispute pretty much identical to this thread developed in my workplace a few months ago. All the above arguments were rehearsed and it got quite heated. Eventually an accountant colleague stepped in with the magisterial pronouncement :
"Some of us pay tax when we die so that all of us can pay less tax while we're still alive."
That shut us all up.
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Jez we did hand the next election to the Tories on a plate!
Posts: 163 | From: Somewhere west of Bristol | Registered: Nov 2002
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
quote:
Originally posted by Touchstone:
A dispute pretty much identical to this thread developed in my workplace a few months ago. All the above arguments were rehearsed and it got quite heated. Eventually an accountant colleague stepped in with the magisterial pronouncement :
"Some of us pay tax when we die so that all of us can pay less tax while we're still alive."
That shut us all up.
But it's rubbish. The dead person isn't really paying tax.
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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ken
Ship's Roundhead
# 2460
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Posted
quote:
Originally posted by Mere Nick:
To build up a hoard like that strongly suggests, if not indicates, that one has produced more than he has consumed.
No it doesn't. It strongly suggests that they have found a way to take a profit off what other people produce.
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Ken
L’amor che move il sole e l’altre stelle.
Posts: 39579 | From: London | Registered: Mar 2002
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Touchstone
Shipmate
# 3560
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Posted
Strictly speaking, no, because they're dead. However it is a tax levied on the dead person's estate. No-one living can take possession of the estate until the tax is paid.
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Jez we did hand the next election to the Tories on a plate!
Posts: 163 | From: Somewhere west of Bristol | Registered: Nov 2002
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Arethosemyfeet
Shipmate
# 17047
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Posted
It seems to me that inheritance tax is an excellent disincentive to "store up for yourself treasures on earth".
Posts: 2933 | From: Hebrides | Registered: Apr 2012
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The Rogue
Shipmate
# 2275
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Posted
Anyone for a SKI* holiday?
*Spending the Kids Inheritance.
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If everyone starts thinking outside the box does outside the box come back inside?
Posts: 2507 | From: Toton | Registered: Feb 2002
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Mere Nick
Shipmate
# 11827
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Posted
quote:
Originally posted by ken:
quote:
Originally posted by Mere Nick:
To build up a hoard like that strongly suggests, if not indicates, that one has produced more than he has consumed.
No it doesn't. It strongly suggests that they have found a way to take a profit off what other people produce.
Not everyone with money got it the way the politicians have, Ken.
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"Well that's it, boys. I've been redeemed. The preacher's done warshed away all my sins and transgressions. It's the straight and narrow from here on out, and heaven everlasting's my reward."
Delmar O'Donnell
Posts: 2797 | From: West Carolina | Registered: Sep 2006
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Albertus
Shipmate
# 13356
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Posted
quote:
Originally posted by leo:
Well, I paid £26K for my place in 1980. I inherited £6k for a deposit. My mortgage was 2 1/2 times my salary and was repaid at £25 per week and I could not afford to furnish it without HP.
So a lot of my earlier life was scrimping and saving.
Why should the government cream off a large amount of what i had to work hard for?
Well, I'd guess that the actual bit that you did work for- the money that you paid for your house, index-linked to general inflation- would be, today, a sum well under the IHT threshold. OTOH, I imagine that the gain in the cash value of your house as a result of crazy-silly house price inflation is not something you lifted a finger to create, so I don't see why you should feel so proprietorial about it.
[ 22. August 2013, 19:20: Message edited by: Albertus ]
Posts: 6498 | From: Y Sowth | Registered: Jan 2008
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would love to belong
Shipmate
# 16747
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Posted
Albertus
Who did, then, lift a finger to create the crazy house price inflation and so deserves to reap it rewards?
Not taking you to task, just probing your thesis that some are entitled to the profit (those who lifted a finger) and some aren't (the rest, presumably).
Posts: 331 | From: Lost and confused | Registered: Oct 2011
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Touchstone
Shipmate
# 3560
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Posted
quote:
quote:
Originally posted by Orfeo:
--------------------------------------------------------------------------------
Originally posted by Touchstone:
A dispute pretty much identical to this thread developed in my workplace a few months ago. All the above arguments were rehearsed and it got quite heated. Eventually an accountant colleague stepped in with the magisterial pronouncement :
"Some of us pay tax when we die so that all of us can pay less tax while we're still alive."
That shut us all up.
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But it's rubbish. The dead person isn't really paying tax.
Sorry to double post but previous post was in haste. I meant to respond further to this by saying that paying inheritance tax is something that the executor does on behalf of the deceased. The beneficiaries do not pay the government anything. Of course, the executor may also be a beneficiary.
I'm always rather mystified as to why this backwater of the tax system arouses such passion. ISTM that it is a sort of "aspirational tax" - after all, the vast majority of people (in the UK) will never be affected at all by inheritance tax, but maybe they like to think that they might be?
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Jez we did hand the next election to the Tories on a plate!
Posts: 163 | From: Somewhere west of Bristol | Registered: Nov 2002
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
quote:
Originally posted by Albertus:
quote:
Originally posted by leo:
Well, I paid £26K for my place in 1980. I inherited £6k for a deposit. My mortgage was 2 1/2 times my salary and was repaid at £25 per week and I could not afford to furnish it without HP.
So a lot of my earlier life was scrimping and saving.
Why should the government cream off a large amount of what i had to work hard for?
Well, I'd guess that the actual bit that you did work for- the money that you paid for your house, index-linked to general inflation- would be, today, a sum well under the IHT threshold. OTOH, I imagine that the gain in the cash value of your house as a result of crazy-silly house price inflation is not something you lifted a finger to create, so I don't see why you should feel so proprietorial about it.
So what would be the tax rate on Leo's windfall if he sold the house himself?
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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Gee D
Shipmate
# 13815
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Posted
quote:
Originally posted by Touchstone:
[QUOTE] Sorry to double post but previous post was in haste. I meant to respond further to this by saying that paying inheritance tax is something that the executor does on behalf of the deceased. The beneficiaries do not pay the government anything. Of course, the executor may also be a beneficiary.
But of course, payment of death duties reduces the amount which residuary beneficiaries receive, so in effect it is they who pay the tax.
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Not every Anglican in Sydney is Sydney Anglican
Posts: 7028 | From: Warrawee NSW Australia | Registered: Jun 2008
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Albertus
Shipmate
# 13356
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Posted
quote:
Originally posted by would love to belong:
Albertus
Who did, then, lift a finger to create the crazy house price inflation and so deserves to reap it rewards?
Not taking you to task, just probing your thesis that some are entitled to the profit (those who lifted a finger) and some aren't (the rest, presumably).
Well, that's more Leo's thesis than mine: I'd say that tax has to be taken somewhere and quite often that is from things that people have worked to achieve- Income Tax, most commonly.
The causes of house price inflation are complex and, I would argue, at least in part the result of a particular social and cultural attitude to residential property which successive governments have at best not challenged and at worst have actually fostered. One might make the argument that insofar as governments have encouraged or enabled house price inflation, it is all the more reasonable that those who have profited from it should pay part of their windfall back to the Treasury. But this argument- which has something in common with the principles which AIUI underpin the arguments for Land Value Taxation- would need to be supported by a detailed analysis which I don't have the capacity to carry out.
Someone else asked what the tax on Leo's windfall would be. Very broadly, the principle in the UK is that if you sell your home you don't pay Capital Gains Tax on any profit you've made, even if you then buy a cheaper home and pocket the difference.
Posts: 6498 | From: Y Sowth | Registered: Jan 2008
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QLib
Bad Example
# 43
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Posted
I have a friend who was born with a disability. How unfair. Fortunately we once had governments that cared about such things and so she was provided with subsidised housing built specially for people with disabilities. The houses were all a standard size, which means that she has a spare bedroom. And so she now has to face a benefit cut.
This country (the UK) is squeezing a few extra pounds a month from people like her, and you want us to cut taxes on people who inherit castles, mansions and houses worth millions? That is simply ridiculous.
Yes, it's nice to live in the home your parents and grandparents were brought up in. But loads of people are forced to sell up and move when they change jobs or get made redundance or otherwise have to downsize for economic reasons.
As someone else said upthread, people get plenty of warning about what is going to happen to their money when they die, and this is in any case, increasingly only a problem that is going to affect the super-rich as most of us are going to have to sell our homes to pay for care in our old age anyway. Why? Because the welfare system is being cut, cut, and cut again so that we can lower taxes. I'm afraid I don't have any spare tears to shed for the plight of those unlucky enough to inherit million-pound properties.
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Tradition is the handing down of the flame, not the worship of the ashes Gustav Mahler.
Posts: 8913 | From: Page 28 | Registered: May 2001
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Touchstone
Shipmate
# 3560
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Posted
Orignally posted by G Dee
quote:
But of course, payment of death duties reduces the amount which residuary beneficiaries receive, so in effect it is they who pay the tax.
No, I’m afraid I don’t buy that. Inheritance tax is a tax on wealth, deferred until after our deaths. While we are still alive we can do whatever we wish with our money, including giving it to family members.
The ethical grounds for taxing wealth is a separate issue, but I’m afraid it’s hard for me to find any moral problem with a tax that makes a very few wealthy people (who have no further need of their wealth because they’re dead), a bit less wealthy. In any case, the treasury leaves open a number of loopholes by which payment can be avoided. It’s as if they’re saying “you only have to pay this tax after you die, and then only if you really want to.”
Frankly, if people leave estates with large I.T. liabilities, it’s their own fault. They should have given it away before they pegged out, or at the very least got themselves a better accountant. One of the responsibilities that goes with owning significant wealth is planning for what should happen to it after you’re gone.
If you own an asset which you can’t leave to your family because the tax on it will be unaffordable (a very rare occurrence) then don’t leave it to them. Find another way. We impose plenty of impossible financial dilemmas on the poor, this is one for the rich to worry about. Nice problem to have.
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Jez we did hand the next election to the Tories on a plate!
Posts: 163 | From: Somewhere west of Bristol | Registered: Nov 2002
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Gee D
Shipmate
# 13815
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Posted
Touchstone, I was picking up on your strictly correct statement that it is the executor who pays the tax, not the beneficiaries; none of your comments deal with my remark that in effect any tax is paid by residuary beneficiaries,
Don't forget duty payable on documents evidencing transfers of both real and personal property between living people, and the common provision that if such transfers are at less than a fair market price, fairly punitive rates of duty are applicable.
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Not every Anglican in Sydney is Sydney Anglican
Posts: 7028 | From: Warrawee NSW Australia | Registered: Jun 2008
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
quote:
Originally posted by Albertus:
Someone else asked what the tax on Leo's windfall would be. Very broadly, the principle in the UK is that if you sell your home you don't pay Capital Gains Tax on any profit you've made, even if you then buy a cheaper home and pocket the difference.
Right. So don't you think it's rather inconsistent that if a house is sold by the current owner, the owner reaps a windfall which (by your own reasoning) they haven't earned, but if the owner dies and passes the property on there's a potential for a large tax bill? Why should the value suddenly become taxable?
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
quote:
Originally posted by Touchstone:
Orignally posted by G Dee
quote:
But of course, payment of death duties reduces the amount which residuary beneficiaries receive, so in effect it is they who pay the tax.
No, I’m afraid I don’t buy that. Inheritance tax is a tax on wealth, deferred until after our deaths. While we are still alive we can do whatever we wish with our money, including giving it to family members.
The ethical grounds for taxing wealth is a separate issue, but I’m afraid it’s hard for me to find any moral problem with a tax that makes a very few wealthy people (who have no further need of their wealth because they’re dead), a bit less wealthy. In any case, the treasury leaves open a number of loopholes by which payment can be avoided. It’s as if they’re saying “you only have to pay this tax after you die, and then only if you really want to.”
Frankly, if people leave estates with large I.T. liabilities, it’s their own fault. They should have given it away before they pegged out, or at the very least got themselves a better accountant. One of the responsibilities that goes with owning significant wealth is planning for what should happen to it after you’re gone.
If you own an asset which you can’t leave to your family because the tax on it will be unaffordable (a very rare occurrence) then don’t leave it to them. Find another way. We impose plenty of impossible financial dilemmas on the poor, this is one for the rich to worry about. Nice problem to have.
You've actually hit a couple of times here on one of the major reasons why I find specific 'death duties' so silly. It makes no sense to me, as I highlighted in my last post, that property transactions occurring before death and property transactions occurring as a result of death are treated differently.
Various pages I've found on the Australian system point out that we do, in fact, have various taxes that can be triggered by a death. But they're not death duties. They're the same taxes that can be incurred by the passing of property at any time, ie the fact that the transaction occurred as the result of a death is irrelevant.
That seems far more sensible than having this rigmarole where people need to make a guess about when they're going to die and hand off property a sufficient time beforehand, even though they're not actually done with that property.
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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aumbry
Shipmate
# 436
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Posted
quote:
Originally posted by orfeo:
quote:
Originally posted by Albertus:
Someone else asked what the tax on Leo's windfall would be. Very broadly, the principle in the UK is that if you sell your home you don't pay Capital Gains Tax on any profit you've made, even if you then buy a cheaper home and pocket the difference.
Right. So don't you think it's rather inconsistent that if a house is sold by the current owner, the owner reaps a windfall which (by your own reasoning) they haven't earned, but if the owner dies and passes the property on there's a potential for a large tax bill? Why should the value suddenly become taxable?
The exemption for capital gains tax merely recognises that if the owner sells his personal residence he is going to need the proceeds either to buy another home or move into a care home where bills have to be paid and taxing the sale would not make that possible. If taxed it would mean that individuals would have little incentive to trade down their home as they got older so as to make way for say young families. This is not relevant to an inheritor who usually will be at an age where they have their own property.
Where there is an unfairness with inheritance tax is the way exemptions work so that between married couples and civil partners there is an unlimited exemption. Such an exemption is not available to say a daughter who has given up a career, or had no career, in order to look after an aged parent but might well find it very difficult to afford to continue living in the family home if a charge to inheritance tax falls on the house on the death of the parent.
I see that Leo's definition of a poor person appears to mean himself !
Posts: 3869 | From: Quedlinburg | Registered: Jun 2001
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Albertus
Shipmate
# 13356
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Posted
quote:
Originally posted by orfeo:
quote:
Originally posted by Albertus:
Someone else asked what the tax on Leo's windfall would be. Very broadly, the principle in the UK is that if you sell your home you don't pay Capital Gains Tax on any profit you've made, even if you then buy a cheaper home and pocket the difference.
Right. So don't you think it's rather inconsistent that if a house is sold by the current owner, the owner reaps a windfall which (by your own reasoning) they haven't earned, but if the owner dies and passes the property on there's a potential for a large tax bill? Why should the value suddenly become taxable?
Yes, of course I think it's inconsistent. I began this discussion thinking that there was a lot to be said for IHT. I still think it's pretty unobjectionable but you've persuaded me that wealth and transaction taxes, which take effect in people's lifetimes, make more sense. In particular, I'd like to see Capital Gains Tax on all home sales (perhaps with a higher liability threshold if you're selling your main home), not least as a way of damping house price speculation.
Posts: 6498 | From: Y Sowth | Registered: Jan 2008
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orfeo
Ship's Musical Counterpoint
# 13878
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Posted
quote:
Originally posted by aumbry:
I see that Leo's definition of a poor person appears to mean himself !
Not that much different to the fact that most people's definition of a rich person is somebody else.
I recently read about an Australian survey earlier this year. A lot people think that the rich should pay more tax. Of people who are actually in the top 5% of earners, around 40% agreed that the rich should pay more tax but many of these people told the same survey that THEY pay more than their fare share.
Personally I know I'm rich. I wouldn't know exactly where I fit on a percentile scale, but I was just able to take a 3-month overseas holiday and I'm well aware that's not very normal.
But my position against death duties has nothing to do with being rich. First, I live in a country where there's no sign that I will ever have to pay death duties. Reintroduction simply hasn't been a political issue here in subsequent decades. Second, I'm not actually very rich in regards to assets - I live in a fairly cheap house. Third, I'm childless and likely to remain so, meaning that anything of mine really IS going to be a windfall to nieces and nephews who also stand to inherit from their parents.
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Technology has brought us all closer together. Turns out a lot of the people you meet as a result are complete idiots.
Posts: 18173 | From: Under | Registered: Jul 2008
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Crœsos
Shipmate
# 238
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Posted
quote:
Originally posted by orfeo:
Right. So don't you think it's rather inconsistent that if a house is sold by the current owner, the owner reaps a windfall which (by your own reasoning) they haven't earned, but if the owner dies and passes the property on there's a potential for a large tax bill? Why should the value suddenly become taxable?
Except that's not the case under most tax systems. Someone selling a house will usually have that sale taxed as capital gains. That's certainly the case for businesses who buy, renovate, and re-sell housing. Just because the inventory consists of houses doesn't mean income generated from their sale is non-taxable. The same is usually held true for personal residences, though purchase and re-sale are usually separated by a longer span.
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Humani nil a me alienum puto
Posts: 10706 | From: Sardis, Lydia | Registered: May 2001
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Marvin the Martian
Interplanetary
# 4360
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Posted
quote:
Originally posted by Touchstone:
Frankly, if people leave estates with large I.T. liabilities, it’s their own fault. They should have given it away before they pegged out
Inheritance tax applies to gifts given up to seven years before the person's death.
My wife was given a piece of jewellery by her great uncle when we visited him last year. When he died some months later we were forced to get it valued in order to determine whether we should pay any inheritance tax on it.
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Hail Gallaxhar
Posts: 30100 | From: Adrift on a sea of surreality | Registered: Apr 2003
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Touchstone
Shipmate
# 3560
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Posted
quote:
Originally posted by Albertus:
Yes, of course I think it's inconsistent. I began this discussion thinking that there was a lot to be said for IHT. I still think it's pretty unobjectionable but you've persuaded me that wealth and transaction taxes, which take effect in people's lifetimes, make more sense. In particular, I'd like to see Capital Gains Tax on all home sales (perhaps with a higher liability threshold if you're selling your main home), not least as a way of damping house price speculation.
I broadly agree with this - there is really no reason why unearned increases in house values should not be liable to taxation (main residences are not liable to CGT in the UK, second homes and rental properties are). Taxing the gains made when you sell your home would certainly be fairer than taxing the price when you buy it (i.e. stamp duty), and might help make houses more affordable to mere mortals. Unfortunately I don't see it being politically possible in a culture that regards making a killing from house price inflation as an entirely good thing.
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Jez we did hand the next election to the Tories on a plate!
Posts: 163 | From: Somewhere west of Bristol | Registered: Nov 2002
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Touchstone
Shipmate
# 3560
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Posted
quote:
Originally posted by Marvin the Martian:
Inheritance tax applies to gifts given up to seven years before the person's death.
My wife was given a piece of jewellery by her great uncle when we visited him last year. When he died some months later we were forced to get it valued in order to determine whether we should pay any inheritance tax on it.
I don't wish to be insensitive about your loss, but if you receive a valuable gift you should get it valued anyway for insurance purposes. I've come across the seven years rule myself - I was told that it exists to dissuade people from coercing their vulnerable, moribund relatives into giving away their property. (It also protects the taxman's interest, of course...) It's one reason why we all need to plan bequests and gifts carefully with appropriate advice.
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Jez we did hand the next election to the Tories on a plate!
Posts: 163 | From: Somewhere west of Bristol | Registered: Nov 2002
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Marvin the Martian
Interplanetary
# 4360
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Posted
It wasn't valuable, except for sentimental reasons. That was the stupidest part of the whole damn thing.
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Hail Gallaxhar
Posts: 30100 | From: Adrift on a sea of surreality | Registered: Apr 2003
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Mere Nick
Shipmate
# 11827
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Posted
The UK inheritance tax does look very nasty when you look at the rate and at what size of an estate the tax kicks in.
Does the queen own Buckingham Palace, Windsor Castle, and the like?
[ 23. August 2013, 16:10: Message edited by: Mere Nick ]
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"Well that's it, boys. I've been redeemed. The preacher's done warshed away all my sins and transgressions. It's the straight and narrow from here on out, and heaven everlasting's my reward."
Delmar O'Donnell
Posts: 2797 | From: West Carolina | Registered: Sep 2006
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Higgs Bosun
Shipmate
# 16582
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Posted
quote:
Originally posted by Mere Nick:
The UK inheritance tax does look very nasty when you look at the rate and at what size of an estate the tax kicks in.
Does the queen own Buckingham Palace, Windsor Castle, and the like?
There is a distinction, I believe, between that which is own by the monarch by right of being the monarch, and that which is owned by the individual. Buckingham Palace is owned by the Monarch, but Sandringham by Elizabeth as an individual.
Posts: 313 | From: Near the Tidal Thames | Registered: Aug 2011
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Touchstone
Shipmate
# 3560
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Posted
quote:
Orinally posted by Mere Nick
The UK inheritance tax does look very nasty when you look at the rate and at what size of an estate the tax kicks in.
Does the queen own Buckingham Palace, Windsor Castle, and the like?
It affects less than 5% of estates and raises about £2.9 billion p.a. (I got this from an article in the Daily Telegraph - their take on it was "Shock horror, look how much the grave robbers are stealing", my reaction was "Shrug".)
The queen does not have to pay any tax at all but I believe she voluntarily pays some. I don't know if it outweighs what the royals get in welfare payments, sorry the civil list.
[/QUOTE]
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Jez we did hand the next election to the Tories on a plate!
Posts: 163 | From: Somewhere west of Bristol | Registered: Nov 2002
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Higgs Bosun
Shipmate
# 16582
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Posted
quote:
Originally posted by Penny S:
I seem to remember there was something about when IHT should be paid with regard to the granting of probate which didn't seem to make sense - surely it can't be that the tax must be paid before there is access to any monies?
It true that the executors of the estate normally cannot sell or distribute the assets until the grant of probate has been received, and this requires that IHT is paid beforehand. There is an exception for funeral expenses. Also, it is also possible to get court permission to sell assets prior to the grant. My sister and I did this in order to sell our parent's house; the proceeds of the sale paid the IHT. Most of the residue (to use the technical term) then was transferred to us.
One curiosity of estate taxation is that the residuary legatees (those receiving some proportion of the estate which remains after specific bequests) have to pay income tax on any estate income.
Posts: 313 | From: Near the Tidal Thames | Registered: Aug 2011
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Higgs Bosun
Shipmate
# 16582
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Posted
quote:
Originally posted by Touchstone:
[
The queen does not have to pay any tax at all but I believe she voluntarily pays some. I don't know if it outweighs what the royals get in welfare payments, sorry the civil list.
[/QUOTE]
I think the lack of tax liability is because the income from the Crown Estates was transferred directly to the Treasury some years ago, and as a result the royals were let off Income Tax.
Posts: 313 | From: Near the Tidal Thames | Registered: Aug 2011
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Merchant Trader
Shipmate
# 9007
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Posted
quote:
Originally posted by Penny S:
I seem to remember there was something about when IHT should be paid with regard to the granting of probate which didn't seem to make sense - surely it can't be that the tax must be paid before there is access to any monies?
Oh yes it can. So I am the Executor of my Father's Estate which consist of a property and some monies but luckily no IHT is due. I could not access any money before the grant of probate.
However, all expenses have had to be paid by me for the 6 months it has taken to get Probate. I have had to borrow £7k just to fund this - running a house and making it saleable is not without cost. In addition if IHT had been due that would have had had to have been paid before Probate, I am lucky the house was not worth more!!!!
I am not wealthy enough to have the cash to meet these expenses but I am luckily to be wealthy enough to borrow. What if I was poor and did not have a good credit rating?
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... formerly of Muscovy, Lombardy & the Low Countries; travelling through diverse trading stations in the New and Olde Worlds
Posts: 1328 | Registered: Jan 2005
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