Is it time to change inheritance tax?

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William Joseph1
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Re: Is it time to change inheritance tax?

Post by William Joseph1 » Mon Oct 29, 2018 11:56 am

It is a private members bill in the House of Lords. Its dead already, just like most of the Lords occupants.
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Re: Is it time to change inheritance tax?

Post by pabenny » Mon Oct 29, 2018 12:49 pm

blythburgh wrote:I do not agree with civil partnerships for siblings but changing inheritance laws so those who live together do not have to sell their home on the death of one of them as can happen under current rules. We do not to force a bereaved spouse to sell their home to pay inheritance tax but we do if they are siblings or even friends who own the property together. This is unfair and needs addressing.
Those who bought houses years ago are sitting on a very substantial windfall gain. The reason they can't afford to pay the IHT - in fact the reason the estate is likely to fall into IHT, is the gain in value. But that gain is tax-free because gains on your 'principal private residence' in HMRC language are exempted from Capital Gains Tax.

If anything is unfair and needs addressing it is the untaxed gains made by those fortunate enough to be on the property ladder 20 years ago.

As regards the specific case prompting the private member's bill: IHT is only levied on estates of more than £325,000; assuming there are no other assets, this allows for the house to be worth £650,000 before any tax is due. If the house was worth £1m, the IHT due would be just £70,000 (Half share = £500k, less tax free band = £175k @40%). On those numbers, the tax could easily be funded using equity release.

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Re: Is it time to change inheritance tax?

Post by macliam » Mon Oct 29, 2018 1:30 pm

pabenny wrote:If anything is unfair and needs addressing it is the untaxed gains made by those fortunate enough to be on the property ladder 20 years ago.
So, are you arguing for retrospective taxation? That's a slippery slope.......
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Re: Is it time to change inheritance tax?

Post by Constantine » Mon Oct 29, 2018 2:18 pm

pabenny wrote:...

As regards the specific case prompting the private member's bill: IHT is only levied on estates of more than £325,000; assuming there are no other assets, this allows for the house to be worth £650,000 before any tax is due.
That only applies if there are two of you. Besides, you have forgotten about the main residence nil-rate band
https://www.gov.uk/government/publicati ... -rate-band

So you should have used a figure of £775,000 before any tax is due.
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Re: Is it time to change inheritance tax?

Post by expressman33 » Mon Oct 29, 2018 2:47 pm

blythburgh wrote:I do not agree with civil partnerships for siblings but changing inheritance laws so those who live together do not have to sell their home on the death of one of them as can happen under current rules. We do not to force a bereaved spouse to sell their home to pay inheritance tax but we do if they are siblings or even friends who own the property together. This is unfair and needs addressing.

Civil partnerships for siblings or even platonic friends is not the way forward IMHO
Changing the current rules would be very complicated and also unfair to siblings who do not live together.
eg: 4 siblings and 2 of them live together in a jointly owned property , 1 dies and leaves 50% of the property to be split between the remaining 3 siblings, would only 2/3 of the taxable value be subject to inheritance tax ? The property may have to be sold anyway to pay the 2 who do not live at the property

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Re: Is it time to change inheritance tax?

Post by pabenny » Mon Oct 29, 2018 3:56 pm

Constantine wrote:That only applies if there are two of you. Besides, you have forgotten about the main residence nil-rate band...
If there weren't two people, the issue of sale to pay IHT wouldn't arise. The additional nil rate band only applies when property is passing to direct descendants. If that applies there is even less tax payable, showing that the 'hardship' rationale for the legislative change is without merit.

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Re: Is it time to change inheritance tax?

Post by Constantine » Mon Oct 29, 2018 5:02 pm

pabenny wrote:
Constantine wrote:That only applies if there are two of you. Besides, you have forgotten about the main residence nil-rate band...
If there weren't two people, the issue of sale to pay IHT wouldn't arise. The additional nil rate band only applies when property is passing to direct descendants. If that applies there is even less tax payable, showing that the 'hardship' rationale for the legislative change is without merit.
I don't understand what you mean.

Only the estates of the deceased pay IHT.

Normally 'couples' hold their home as joint tenants. So on the first death the home passes to the other tenant without forming part of the estate; no IHT is payable.

I'm not expressing an opinion on this proposed 'legislative change'. I'm simply trying to explain how IHT actually works.
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