Tuesday, April 11, 2006

Inheritance Tax: it's just luck, ain't it?

As readers will know, I am no fan of Inheritance Tax, but at least there used to be ways around it. However, in the last Budget, the fucking one-eyed arsehole Brown—or should that be Brown arsehole?—decided to put a stop to all that.

Bad enough one would think, but Allan has found that it is even worse than we originally thought.
I earn a decent wage, but almost 100% of my capital assets are tied up in my property. My house has more than doubled in value since I bought it. I could choose to feel smug about that but I can’t.

The reality is, if I die tomorrow, my wife will probably have to sell the house to pay the inheritance tax bill. Whilst my wife and kids are busy mourning the loss of husband and father, El Gordo will come banging on the door looking for his cut. My wife will have to raise thousands in cash, in a hurry, to pay that fat useless prick for the privilege of living in her own home. A home that she has helped build and has more than contributed to all her married life.

Yup, that's right, the IHT will now apply to spouses as well. Never mind, I hope that Gordo's wife still loves him when she has to sell her fucking house when—please god, let it happen soon—our Cyclopean Chancellor fucking dies. Gordo can stuff that up his fucking brown eye...

It'll please all those spiteful little socialists, anyway: after all, it's only taxing fucking luck, eh...?

EDIT: Allan had it wrong: apologies. I still fucking hate IHT though...

17 comments:

Anonymous said...

Your extract is a little misleading - there's no IHT payable on property left to a spouse. But as I understand it there would be tax payable on other assets above the threshold. And as "Allan" says most of his assets are tied up in his property I'm a little confused. It's a fairly common principle of taxation that you get whacked for unearned wealth - luck as you call it - whether capital gains, inheritance or whatever and I support that though not at the expense of surviving partner and children having to move because of the tax situation (though of course loss of the principal wage earner might necessitate radical changes anyway). Rising house prices mean the thresholds are now low - and they are being raised. Not enough for you maybe!

Devil's Kitchen said...

Allan was quoting this article from a chartered accountant.

But you are correct; I'm sure that he is absolutely wrong and this is just all in my fucking head.

DK

Anonymous said...

Didn't say that - and I'm not an expert in taxes. But there is a world of difference between taxes that are punitive and leave a bereaved partner and/or dependent children financially vulnerable and taxes that hit the rest of us. When my parents die Edinburgh house prices are such that they'll probably leave my sister and I property in the region of £500k - of which we seem to get £285k free and gratis and give the tax man £86k (40%) on the other part. So two non-dependent adult children with their own jobs and homes get £414,000 unearned dosh and let's face it the old folk didn't "earn" the capital growth either. And the taxman is welcome to his share - so long as he spends it wisely, but that's another story.........

Katy Newton said...

If a chartered accountant says that's the case then I can't argue, but I'm astonished that the press hasn't picked up on it. I'd have thought there'd be an uproar.

Anonymous said...

But I can't see anything that says property passing to a spouse is taxed - only trusts (bad enough though it is). It's one thing to tax inheritance passing to the next generation, but to tax a spouse who will in all likelihood have contributed to that wealth is criminal.

It's not clear from the article what happens when assets are in joint names as is the case with myself and Mrs Longrider.

Katy Newton said...

Anonymous, the principle of tax is that you pay tax on everything you have, earned or unearned. Your parents have worked all their lives to earn money to save or put into property. I'm guessing that they aren't people who have been financially assisted by the government to any great extent. It is their property, earned by them, and they want to give that to you and your siblings, not the government.

Now, I'm not against taxation in principle at all, nor am I against higher rates of tax for richer people, but inheritance tax to me is different. The inheritance tax is no better than theft. There is no difference between inheritance tax and someone finding a dead body and taking 40% of the money in their wallet before their heirs get there. The only luck at play here is the government's good fortune in being able to make a fast buck out of a taxpayer dying.

MatGB said...

Actually, I'm with anonymous.

When my either of my grandmothers die, I stand to inherited a healthy chunk; both own their own properties in small, "picturesque" south devon villages.

What, exactly, have I done to deserve that money? I haven't earnt it, it's nothing to do with me, it'll be mine by quirk of genetics.

Ergo, inheritance over a certain value is taxed. Agree with Longrider though, taxing spousal inheritance is just wrong.

But next generation inheritance is something that isn't earned in any way. You've done nothing to earn it other than be born.

Katy Newton said...

I don't understand why earning has anything to do with it. We get taxed on stuff we have earned all the time, and we don't get taxed on other gifts given within the lifetime of the donor. For example, if someone buys me a house as a gift during their lifetime, as I understand it I don't have to pay any kind of tax on it, unless they die within 7 years of the purchase in which case inheritance tax kicks in, whether I've earned the house or not.

Some lovely unselfish people don't mind inheritance tax and some do, but there's no meaningful distinction to be made between earned money and unearned money from a taxation point of view. You pay tax on all of it.

Also, your parents have already paid tax on the money that they used to buy their house, so the government gets to skim off the top of their money twice. It's wrong, I tell you, wrong.

dearieme said...

It could be that the chap planned to leave half the house to his wife THROUGH A TRUST, and that that is why there will be tax to pay. Just a guess.

Since what makes us lot devilishly rich compared to ninety plus percent of mankind is the fluke of being born in a First World country, those who object to inheritances will doubtless rush forward to abjure the UK citizenship that so enriches them? Yeah, right.

Katy Newton said...

As with tax generally, I suspect I would be somewhat less irritated by inheritance tax if I felt that the money might be put towards something useful.

Anonymous said...

Well we're all agreed on the last point. I think as tax has to come from somewhere though that the IHT is no more unfair than the rest with the caveat I mentioned before about protecting dependents. And actually I rather think that my parents are pleased to give something back AND leave me a wee nest egg too - they are after all now receiving free-to-them home adaptations to enable them to use the bathroom etc. and are now users of services such as NHS rather than contributors. Plus they know the increase in value of their home is luck of the draw and a result of wider economic factors - imagine they came from Cumbernauld not Edinburgh and you'd knock 000s of my future windfall! If we didn't have IHT - and let's pretend for a second that we all believe the overall tax vs spend levels and direction are in perfect harmony - then what would we do? I already pay 40% income tax and would rather keep what I earn than what I'll inherit. Sorry, a bit of a ramble but I'm sleepy

Devil's Kitchen said...

So two non-dependent adult children with their own jobs and homes get £414,000 unearned dosh and let's face it the old folk didn't "earn" the capital growth either.

No, your folks took a gamble by inveting capital and income into a property rather than taking the (probably) cheaper option of renting. Their gamble paid off, and you get rewarded because those who made the gamble would like you to be. If you don't want the money, give it to Amnesty International or something. No one is stopping you.

When my either of my grandmothers die, I stand to inherited a healthy chunk; both own their own properties in small, "picturesque" south devon villages.

What, exactly, have I done to deserve that money? I haven't earnt it, it's nothing to do with me, it'll be mine by quirk of genetics.

Mat, frankly you disgust me: I am thinking of revoking your membership of The Kitchen. Let me ask you this question instead: what, exactly, have either the government, or those that they would give your putative money to, done to earn that cash?

Your grandmothers want you to have the money that they risked (and paid a mortgage towards for their entire fucking lives) and you think that through a "quirk of genetics" that you don't deserve it? Fine: give the lot to the government, go on. Let them piss it up the wall on hugely overpriced IT projects that don't work, or on National Insurance contributions that don't buy you the healthcare and pension that they were supposed to. Or why not go distributing £100 notes in the fucking Gorbals? Or, alternatively, you could get off your fucking knees and go and do something worthwhile.

You don't want the money: fine. You are at liberty to give it away to charities and other pressure groups. Go do it; no one is stopping you.

as I understand it I don't have to pay any kind of tax on it, unless they die within 7 years of the purchase in which case inheritance tax kicks in, whether I've earned the house or not.

If it is your primary residence, then you don't have to pay tax at all (apart from Stamp Duty (which Gordon raised in one of his first budgets: I had to pay the government £720 for the pleasure of buying a private property off a private seller)) when you buy a primary residence. Unless, of course, the money that you use to buy it is inherited.

Since what makes us lot devilishly rich compared to ninety plus percent of mankind is the fluke of being born in a First World country, those who object to inheritances will doubtless rush forward to abjure the UK citizenship that so enriches them? Yeah, right.

What does $1 buy in Africa? What does $1 buy in Britain? Enough of this bullshit.

I already pay 40% income tax and would rather keep what I earn than what I'll inherit.

Granted, Anon. But given that these services are used by the poorest, as I have said before, it is far fairer to tax income because everybody earns income. If your parents choose to save their money rather than piss it away, then you should be rewarded (unless they hate you, in which case, tough shit).

DK

Anonymous said...

But they DIDN'T save money, nor did they gamble (nor do they hate me). They bought a home to live in, not as an investment, and it's that more than anything that means that people today are affected by IHT because thresholds haven't risen in proportion to property prices. One of the principal things affecting my parents' home price is development and regeneration, both public and private, in the surrounding area ie "society's" investment. For the rest of it on this post and the other your arguments aren't really about IHT but tax generally - tax and charity aren't interchangeable options and just as you don't seem to want your taxes to go to to "society" (though your stereotypes of drug addled council estates and so on are a lazy and tiresome) I certainly don't support all things my taxes go to.

We have taxes and always will - paying 40% on estates above £285k, and that threshold is rising, seems fair enough to me. And incidentally "luck" isn't taxed - premium bonds, lottery, gambling.......keep it, it's all yours.

I don't disagree with all your points about family - but I suspect it's much easier to argue for the family that provides for future generations (more Mounsey's? God help us! Or will it be Red McMounseys in view of the latest liaison? ) rather than the state, when you've got the safety blanket of being in a family that's able to, whether or not through luck, ability, hard graft or fate.

Mr Eugenides said...

Does the esteemed pater read your blog and, if so, is he a little nervous about this renewed focus on the inheritance he plans to leave you?

Put another way; if you buy him an Easter Egg this weekend, should he risk eating any of it?

Allan Scullion said...

Mea Culpa... I must have misunderstood my advisor when he was describing NIL rate band discritionary trusts.

I will amend the article. However, is both my wife and I are wiped out, my kids will probably lose the home they were brought up in.

Anonymous said...

Allan, that clears up my question. However, it is a valid point about the next generation. There was a time when my youngest sister lived with my parents and her earnings would not have sustained a mortgage. Had they died and left her the house - as planned - the government would have seen her turned out to pay them their slice of the action.

Anonymous said...

Yep, lady luck sure is shining these days, for example, half of London (including my oh so super rich teacher parents, who had their pension cut to the bone when Equitable Life went pear shaped) are undeserving, lucky, haven't earned it, rich gits

..."Last month, Scottish Widows estimated that almost half of homeowners in London and over a third in the rest of the south of England are over the threshold for paying IHT"

The very model of a modern scientific man

Your humble Devil was thoroughly amused by Neil Ferguson's fall from grace, and is very pleased to have found the time to outline Fergus...