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Inheritance Tax

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    edited July 2015
    Fiiish said:

    limeygent said:

    Never seems right to tax income that's already been taxed, no matter the wealth of the taxpayer.

    That would apply to virtually all VAT, stamp duty, insurance tax, airport tax, fuel tax, alcohol duty, council tax . . . in fact, if operated as a principle it would just lead to a big rise in income tax.
    Virtually all of those are transactional taxes, rather than taxes on wealth or income.
    Indeed, but the point being made was that earned income, which is what is being spent, shouldn't be taxed again.
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    Fiiish said:

    limeygent said:

    Never seems right to tax income that's already been taxed, no matter the wealth of the taxpayer.

    That would apply to virtually all VAT, stamp duty, insurance tax, airport tax, fuel tax, alcohol duty, council tax . . . in fact, if operated as a principle it would just lead to a big rise in income tax.
    Virtually all of those are transactional taxes, rather than taxes on wealth or income.
    Indeed, but the point being made was that earned income, which is what is being spent, shouldn't be taxed again. In fact, for many people the value of their house is out of all proportion to what they paid and in the minority of cases where it currently becomes taxable on death this is due to the property price bubble (because the threshold hasn't kept pace with house price inflation), so they haven't actually been taxed on the part above the threshold before.

    It's a windfall of unearned income . . . which is why it should be taxed.
    Property price inflation is wealth, not income. It is also hardly unearned - someone is willing to pay more for your house now than they were 20 years ago, so someone would have had to have earned that money to pay for it.

    The reason why we have a tax such as VAT isn't because it is a tax on already earned income, it is a tax associated with the public costs to facilitate that transaction.
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    I have always thought that Inheritance tax is one othe the most important and fairest taxes in any modern society. It is such a shame that there have always been so many loop holes and avoidance schemes which means the IHT contribution to the total tax take each year is a fraction of what it should be which means higher income taxes for ordinary working people.

    I found several opinion pieces which make very effective (in my opinion) arguments for Inheritance Tax.


    spectator.co.uk/features/269796/listen-to-adam-smith-inheritance-tax-is-good/

    newstatesman.com/politics/2008/04/inheritance-tax-stuart-white

    theguardian.com/commentisfree/2007/oct/07/comment.inheritancetax
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    edited July 2015
    Fiiish said:

    Fiiish said:

    limeygent said:

    Never seems right to tax income that's already been taxed, no matter the wealth of the taxpayer.

    That would apply to virtually all VAT, stamp duty, insurance tax, airport tax, fuel tax, alcohol duty, council tax . . . in fact, if operated as a principle it would just lead to a big rise in income tax.
    Virtually all of those are transactional taxes, rather than taxes on wealth or income.
    Indeed, but the point being made was that earned income, which is what is being spent, shouldn't be taxed again. In fact, for many people the value of their house is out of all proportion to what they paid and in the minority of cases where it currently becomes taxable on death this is due to the property price bubble (because the threshold hasn't kept pace with house price inflation), so they haven't actually been taxed on the part above the threshold before.

    It's a windfall of unearned income . . . which is why it should be taxed.
    Property price inflation is wealth, not income. It is also hardly unearned - someone is willing to pay more for your house now than they were 20 years ago, so someone would have had to have earned that money to pay for it.

    The reason why we have a tax such as VAT isn't because it is a tax on already earned income, it is a tax associated with the public costs to facilitate that transaction.
    I haven't suggested that VAT is levied on transactions because the spending is earned income, but rather that spending is taxed (rightly) despite it being earned income and that an argument against "double taxation" on the latter basis would be nonsense.

    You're right that house price inflation is wealth and not income, but that growth has very little to do with what you earned in the first place. For example, people with houses near Crossrail stations will benefit from a rise in prices that has nothing to do with them earning the money in the first place and everything to do with public policy. Generally property owners will benefit because successive governments have allowed and encouraged a dysfunctional housing market.
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    Anyone who advocates this is just a hard nosed leftie who wants to tax everyone who earns over 50p

    FFS we all pay far too much tax when we are alive

    The problem with lefties is they see someone earning £100k as a rich Tory bastard and someone earning £500m a year as a rich tory bastard when in reality it's the people earning £100k that are putting more than their fair share into the pot to pay for jobless, lazy workshy northern labour arseholes

    I think my rant is over

    The trouble with some working class lads made good is they can't help stereotyping everything and anything and making massive assumptions, as well as being unable to recognise that they have an extraordinary talent that no amount of hard work will bring to less talented people than yourself Tim.

    Some people just really care about other people. I can get your look after number one mentality, why can't you get mine?
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    Why not actually have an inheritance tax then? Instead of taxing the assets of the deceased, set a lifetime allowance one person is allowed to inherit from any corpse (say £250k) before a tax is payable.
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    Anyone who advocates this is just a hard nosed leftie who wants to tax everyone who earns over 50p

    FFS we all pay far too much tax when we are alive

    The problem with lefties is they see someone earning £100k as a rich Tory bastard and someone earning £500m a year as a rich tory bastard when in reality it's the people earning £100k that are putting more than their fair share into the pot to pay for jobless, lazy workshy northern labour arseholes

    I think my rant is over

    But that's why I like IHT. I'd rather be taxed less while I'm alive. Who cares if I get taxed on death? My opinion is irrelevant. I don't matter anymore. The government has to have money, it can take it off my corpse.
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    Fiiish said:

    limeygent said:

    Never seems right to tax income that's already been taxed, no matter the wealth of the taxpayer.

    That would apply to virtually all VAT, stamp duty, insurance tax, airport tax, fuel tax, alcohol duty, council tax . . . in fact, if operated as a principle it would just lead to a big rise in income tax.
    Virtually all of those are transactional taxes, rather than taxes on wealth or income.
    Indeed, but the point being made was that earned income, which is what is being spent, shouldn't be taxed again.
    No, the point was that earned income that is being taxed, is being taxed again.
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    Fiiish said:

    I'm sure it used to be called death duties. Inheritance tax sounds so much better.

    It's a misnomer though - it is not a tax on inheritance. If an unmarried man dies tomorrow and has an estate equal to £1million in cash once it has all been liquidated, and his solicitor was instructed to burn his entire fortune on his death, the solicitor would still need to take £270,000 from that fortune and pay it to the taxman before he burnt the rest of it. No one has inherited anything. It is a tax on dying.
    That's a rare scenario.

    If the solicitor was allowed to burn the full £1m in that situation, would your objections to inheritance tax evaporate?
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    Going back to that theoretical 100K house that's worth 1m pounds at the end of a thirty year mortgage. How much have we actually paid for that house, with all the interest etc.? We have (many of us anyway) struggled to make that payment each month, to keep a roof over our heads through whatever have been our struggles. Suggesting that there is a 900k unearned profit is ridiculous, there's probably few profits that have been harder earned, and with inflation taking a huge chunk out as well, how much profit is there really?
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    edited July 2015
    IA said:

    Fiiish said:

    I'm sure it used to be called death duties. Inheritance tax sounds so much better.

    It's a misnomer though - it is not a tax on inheritance. If an unmarried man dies tomorrow and has an estate equal to £1million in cash once it has all been liquidated, and his solicitor was instructed to burn his entire fortune on his death, the solicitor would still need to take £270,000 from that fortune and pay it to the taxman before he burnt the rest of it. No one has inherited anything. It is a tax on dying.
    That's a rare scenario.

    If the solicitor was allowed to burn the full £1m in that situation, would your objections to inheritance tax evaporate?
    See my previous posts, I'm much more comfortable with the idea that each person has a taxable lifetime allowance on inherited wealth (which can be monitored in much the same way a pension or ISA can be).

    My main objection to inheritance tax is it, as it is currently collected in the UK, falls disproportionately on asset-rich, cash-poor corpses who are leaving very meagre wealth in comparison to far richer people who are financially savvy enough to limit the exposure to IHT. Levy it on those inheriting proceeds of a will instead and there is virtually no way one person can inherit millions of so-called unearned wealth without paying a fair level of tax on it.
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    limeygent said:

    Going back to that theoretical 100K house that's worth 1m pounds at the end of a thirty year mortgage. How much have we actually paid for that house, with all the interest etc.? We have (many of us anyway) struggled to make that payment each month, to keep a roof over our heads through whatever have been our struggles. Suggesting that there is a 900k unearned profit is ridiculous, there's probably few profits that have been harder earned, and with inflation taking a huge chunk out as well, how much profit is there really?

    I just had a look, apparently 25 years at 6% = £193'200, which is the length of most mortgages (well it was mine anyway), 30 years = £215,640.

    According to this site...

    http://www.thisismoney.co.uk/money/bills/article-1633409/Historic-inflation-calculator-value-money-changed-1900.html,

    ...since 1990 the total rate of inflation is 129% so your £100k house should be worth £122'500 approx?

    However, if you look at what £100k was worth in 1990 and what it's worth now, it comes up with £222'500 approx?

    Either way you have made a handsome profit, income or "wealth".

    If you have any sense, you pay it off in 15 years, sell up and move somewhere much cheaper, and chill out man...
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    Inheritance tax was not invented to raise money for the government to spend, it was to prevent land being accumulated and passed on to generations so preventing re-distribution of wealth.

    You are free to take the view that once a tax has served its original purpose you should continue it as a source of revenue and re-justify it, or as I think is the case here, government questions the validity of a tax. Why should a modest homeowner in Bromley be part of the society that re-distributes his accumulated wealth to the rest of society?

    Tax used to be an accountable imposition by government for a specific costed objective, it is now an obligation we meekly accept at the whim of the elected government. The result is a narrative that tax is a moral obligation, and the only reason politicians can't spend what they want, or government has to borrow money, is that someone must be avoiding their moral tax obligations.

    If we need more money for the NHS and schools then tax should be raised, not benefits cut. Then we might get back to accountability for public spending and the reality that public spending = taxes. The smoke screen around who isn't paying enough tax is simply a diversion to avoid confronting the reality of promising more than we are prepared to pay for.
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    I'm confused.

    A Greek bar owner working an 18 hour day, but not telling the tax man about how much he's taking in, is a feckless, tax dodging git of an ilk largely responsible for the complete breakdown of his countries economy and impending collapse of its public services.

    A heir, who might never have worked a day in their life instead relying on the Bank of Mum and Dad, is currently the victim of a grossly unfair and undemocratic penalty because they might have to lose some dosh to tax on a million pounds worth of inherited wealth that they never contributed to in the first place.

    Both seem a bit out of order to me but I'm sure our great and the good know best.
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    Who are you quoting there SR, as I've not seen anyone post what you've just stated.
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    Fiiish said:

    IA said:

    Fiiish said:

    I'm sure it used to be called death duties. Inheritance tax sounds so much better.

    It's a misnomer though - it is not a tax on inheritance. If an unmarried man dies tomorrow and has an estate equal to £1million in cash once it has all been liquidated, and his solicitor was instructed to burn his entire fortune on his death, the solicitor would still need to take £270,000 from that fortune and pay it to the taxman before he burnt the rest of it. No one has inherited anything. It is a tax on dying.
    That's a rare scenario.

    If the solicitor was allowed to burn the full £1m in that situation, would your objections to inheritance tax evaporate?
    See my previous posts, I'm much more comfortable with the idea that each person has a taxable lifetime allowance on inherited wealth (which can be monitored in much the same way a pension or ISA can be).

    My main objection to inheritance tax is it, as it is currently collected in the UK, falls disproportionately on asset-rich, cash-poor corpses who are leaving very meagre wealth in comparison to far richer people who are financially savvy enough to limit the exposure to IHT. Levy it on those inheriting proceeds of a will instead and there is virtually no way one person can inherit millions of so-called unearned wealth without paying a fair level of tax on it.
    OK, thank you.
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    I'm confused.

    A Greek bar owner working an 18 hour day, but not telling the tax man about how much he's taking in, is a feckless, tax dodging git of an ilk largely responsible for the complete breakdown of his countries economy and impending collapse of its public services.

    BA, the only person that I am aware, who has spouted this nonsense is you.

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    edited July 2015

    I'm confused.

    A Greek bar owner working an 18 hour day, but not telling the tax man about how much he's taking in, is a feckless, tax dodging git of an ilk largely responsible for the complete breakdown of his countries economy and impending collapse of its public services.

    A heir, who might never have worked a day in their life instead relying on the Bank of Mum and Dad, is currently the victim of a grossly unfair and undemocratic penalty because they might have to lose some dosh to tax on a million pounds worth of inherited wealth that they never contributed to in the first place.

    Both seem a bit out of order to me but I'm sure our great and the good know best.

    But, you've taken the two colourfully described fictional extremes to make your point. Reality is a little different. So, look instead at the Greek doctors who don't take credit cards or cheques or issue receipts: cash only for them. It seems some earn €700k but pay hardly any tax. See this oldish article news.bbc.co.uk/1/hi/programmes/from_our_own_correspondent/8509244.stm

    Then, rather than your fictional chinless ne'er-do-well, think about an ordinary hard-working family (yes, I know) who inherits a small house in Bromley but has no option but to sell it to pay the inheritance tax. Two sides of the same drachma.

    I can see how some might like to craft individually tailored tax laws depending upon their own perception of how much tax a person "deserved" to be screwed for, so they could laugh with glee as another stereotypical, work-shy, upper-class twit was snagged.
    The reality is that tax collection has to be done on a more pragmatic level with one-size-fits-all regulations - or, at least, a sliding scale. Otherwise there would be chaos and everyone in the country would have to be employed by HMRC in order to have sufficient time to work out there own tax bills. (We started to go down that road when Gordon Brown began tweaking the tax regs here and massaging them there until no one knew what the hell was going on except him and we ended up with a level of tax complexity which was HMRC's equivalent to breaking a butterfly on a wheel.)
    The Tax Code in this country is already a staggering 17,000 pages long. It has trebled in size since 1997. It seems some tax lawyers have calculated that a Tax Code consisting of 276 pages would raise the same levels of tax. But to make sure everyone pays their kilo of flesh, some would like an even longer and more incomprehensible code it seems.

    BTW, your Greek bar owner may indeed flog his guts out in the Summer but that's compensated for by the long winter closures.
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    edited July 2015
    limeygent said:

    Fiiish said:

    limeygent said:

    Never seems right to tax income that's already been taxed, no matter the wealth of the taxpayer.

    That would apply to virtually all VAT, stamp duty, insurance tax, airport tax, fuel tax, alcohol duty, council tax . . . in fact, if operated as a principle it would just lead to a big rise in income tax.
    Virtually all of those are transactional taxes, rather than taxes on wealth or income.
    Indeed, but the point being made was that earned income, which is what is being spent, shouldn't be taxed again.
    No, the point was that earned income that is being taxed, is being taxed again.
    And my point is that this is nearly always the case with all personal taxes other than income tax - an argument against IHT based on the idea it is double taxation would apply to almost anything that is not income tax. If anything it applies less to a tax that arises from asset price inflation than it does to transaction taxes.
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    cafcfan said:

    I'm confused.

    A Greek bar owner working an 18 hour day, but not telling the tax man about how much he's taking in, is a feckless, tax dodging git of an ilk largely responsible for the complete breakdown of his countries economy and impending collapse of its public services.

    A heir, who might never have worked a day in their life instead relying on the Bank of Mum and Dad, is currently the victim of a grossly unfair and undemocratic penalty because they might have to lose some dosh to tax on a million pounds worth of inherited wealth that they never contributed to in the first place.

    Both seem a bit out of order to me but I'm sure our great and the good know best.

    But, you've taken the two colourfully described fictional extremes to make your point. Reality is a little different. So, look instead at the Greek doctors who don't take credit cards or cheques or issue receipts: cash only for them. It seems some earn €700k but pay hardly any tax. See this oldish article news.bbc.co.uk/1/hi/programmes/from_our_own_correspondent/8509244.stm

    Then, rather than your fictional chinless ne'er-do-well, think about an ordinary hard-working family (yes, I know) who inherits a small house in Bromley but has no option but to sell it to pay the inheritance tax. Two sides of the same drachma.

    I can see how some might like to craft individually tailored tax laws depending upon their own perception of how much tax a person "deserved" to be screwed for, so they could laugh with glee as another stereotypical, work-shy, upper-class twit was snagged.
    The reality is that tax collection has to be done on a more pragmatic level with one-size-fits-all regulations - or, at least, a sliding scale. Otherwise there would be chaos and everyone in the country would have to be employed by HMRC in order to have sufficient time to work out there own tax bills. (We started to go down that road when Gordon Brown began tweaking the tax regs here and massaging them there until no one knew what the hell was going on except him and we ended up with a level of tax complexity which was HMRC's equivalent to breaking a butterfly on a wheel.)
    The Tax Code in this country is already a staggering 17,000 pages long. It has trebled in size since 1997. It seems some tax lawyers have calculated that a Tax Code consisting of 276 pages would raise the same levels of tax. But to make sure everyone pays their kilo of flesh, some would like an even longer and more incomprehensible code it seems.

    BTW, your Greek bar owner may indeed flog his guts out in the Summer but that's compensated for by the long winter closures.
    And who on here doesn't? :smile:
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    Can enybody tell me why the rate is 40% ? which is double the rate of income tax and VAT.
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    Dansk_Red said:

    Can enybody tell me why the rate is 40% ? which is double the rate of income tax and VAT.

    Leave 10% to charity and you only have to pay 36%

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    Dansk_Red said:

    Can enybody tell me why the rate is 40% ? which is double the rate of income tax and VAT.

    Income tax is only 20 per cent on £31,786 of income above the personal allowance. After that it's 40 per cent or higher. In the case of IHT the personal allowance is £325k and transferrable to spouses. I think there's an argument for making it more progressive, but realistically the higher marginal rate is going to kick in pretty quickly anyway.
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    Dansk_Red said:

    Can enybody tell me why the rate is 40% ? which is double the rate of income tax and VAT.

    No. It's ranged between 8% and 80% over the years and brings in diddlysquat compared to income tax whatever rate it is.
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    edited July 2015

    Dansk_Red said:

    Can enybody tell me why the rate is 40% ? which is double the rate of income tax and VAT.

    No. It's ranged between 8% and 80% over the years and brings in diddlysquat compared to income tax whatever rate it is.
    Lots of taxes could be abolished on that basis . . . (08/09 figures), but of course they are not just there to raise money.

    image
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    edited July 2015

    I'm confused.

    A Greek bar owner working an 18 hour day, but not telling the tax man about how much he's taking in, is a feckless, tax dodging git of an ilk largely responsible for the complete breakdown of his countries economy and impending collapse of its public services.

    BA, the only person that I am aware, who has spouted this nonsense is you.

    This may come as shock but other sources of opinion on current affairs are available apart from CL.

    I gave the examples I did to illustrate that there's a degree of mental gymnastics at play to justify on the one hand placing (at least part of) the blame on the Greek situation on the population not pulling their weight by paying for the public services they expect via the tax system...and on the other being quite happy that a small percentage of (soon to be) quite wealthy people are to be exempted from contributing a percentage of that unearned wealth to the good of society.

    Let's not forget that for every pound that the government doesn't collect from this tax another pound has to be raised from other taxes, or much more likely cut from our public services.
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    Dansk_Red said:

    Can enybody tell me why the rate is 40% ? which is double the rate of income tax and VAT.

    No. It's ranged between 8% and 80% over the years and brings in diddlysquat compared to income tax whatever rate it is.
    Lots of taxes could be abolished on that basis . . . (08/09 figures), but of course they are not just there to raise money.

    image
    Demonstrates my point. Taxes have become a political tool. We keep running out of ways to raise taxes and categories of people to blame for not paying their "fair" share of taxes. Creating endless categories of taxes is the equivalent of looking for sofas that must have money hidden down the back.

    I didn't mention abolishing taxes, but now you have, yes a great idea. Just put up all the taxes that raise money effectively, like income tax and corporation tax and scrap all the social engineering and politically motivated taxes that cost more to administer than they raise in revenue. We might then take a greater interest in calling our politicians to account when they want to spend our money.


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    edited July 2015
    cafcfan said:

    I'm confused.

    A Greek bar owner working an 18 hour day, but not telling the tax man about how much he's taking in, is a feckless, tax dodging git of an ilk largely responsible for the complete breakdown of his countries economy and impending collapse of its public services.

    A heir, who might never have worked a day in their life instead relying on the Bank of Mum and Dad, is currently the victim of a grossly unfair and undemocratic penalty because they might have to lose some dosh to tax on a million pounds worth of inherited wealth that they never contributed to in the first place.

    Both seem a bit out of order to me but I'm sure our great and the good know best.

    But, you've taken the two colourfully described fictional extremes to make your point. Reality is a little different...
    Of course but BTW I know of several individuals in my own area who do actually behave in exactly this way and have no intention of ever working because they do not have to. I'm not saying they're the norm but they do exist. Their mum and dad have made their money in the city, business, crime, whatever years ago and they are bought a house, car, given an allowance, etc, etc and are left to spend their days going to the beach before doing a spot of lunch, and so on.

    That's up to them and their conscience as to whether to accept this lifestyle but I know people who happily do and in 10 or 20 years time will also be inheriting multimillion pound properties, which our government feels should now be exempt from tax on the first million.

    Sorry but that just doesn't sit comfortably with me.
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    Dansk_Red said:

    Can enybody tell me why the rate is 40% ? which is double the rate of income tax and VAT.

    No. It's ranged between 8% and 80% over the years and brings in diddlysquat compared to income tax whatever rate it is.
    Lots of taxes could be abolished on that basis . . . (08/09 figures), but of course they are not just there to raise money.

    image
    Demonstrates my point. Taxes have become a political tool. We keep running out of ways to raise taxes and categories of people to blame for not paying their "fair" share of taxes. Creating endless categories of taxes is the equivalent of looking for sofas that must have money hidden down the back.

    I didn't mention abolishing taxes, but now you have, yes a great idea. Just put up all the taxes that raise money effectively, like income tax and corporation tax and scrap all the social engineering and politically motivated taxes that cost more to administer than they raise in revenue. We might then take a greater interest in calling our politicians to account when they want to spend our money.


    The purpose of government isn't solely about raising revenue to spend, however, is it? It's quite rightly also about discouraging things that are damaging to the public good. If you don't like the politicians' definition of the public good, the system allows you to put up against them, but personally I want to see taxes on alcohol, fuel, landfill, etc, that make these things less attractive/obtainable and I want to see wealth redistributed to mitigate the extremes of inequality that would otherwise destabilise society and ultimately make the quality of life worse for everyone.

    In any event, if the whole tax burden was thrown on to income tax and corporation tax there would be so much squealing about incentives that the process would quickly be thrown into reverse.
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