[Politics] Inheritance Tax

sagaman · Oct 20, 2024

Hugo Rune said:
If you are in a family of 4, (which I am in), your family entitlement (from birth) would be 4 houses. That’s one house to live in, a holiday home and two for rent until your kids are old enough to move out and live in them.

This statement is completely untrue.. Any person has an allowance of 325 k on death. So married couple 700k. If they also own a home then allowance goes up to £1m. Does not allow multiple homes

Westdene Seagull · Oct 20, 2024

Shropshire Seagull said:
I guess the main difference is with CGT you get the wonga in your mitt before the CGT tax has to be paid whereas with IHT you have to cough the tax BEFORE you get any wonga? Have I got that right?

Correct - and CGT is another tax that is taxed at true value. IHT you are expected to pay before probate is granted i.e. before ANY non-cash assets have been turned into cash. You can ask to pay in three monthly instalments but the evidence as to why you want to do this is ridiculous.

Herr Tubthumper · Oct 20, 2024

Westdene Seagull said:
Correct - and CGT is another tax that is taxed at true value. IHT you are expected to pay before probate is granted i.e. before ANY non-cash assets have been turned into cash. You can ask to pay in three monthly instalments but the evidence as to why you want to do this is ridiculous.

assuming you mean the sale value, this is not necessarily true. If you sell assets for less than they are worth you could be asked to pay CGT on their market value.

Hugo Rune · Oct 20, 2024

sagaman said:
This statement is completely untrue.. Any person has an allowance of 325 k on death. So married couple 700k. If they also own a home then allowance goes up to £1m. Does not allow multiple homes

You’ve completely missed the context of my post. It wasn’t meant to be a statement of fact. It’s related to a hypothetical situation I mentioned earlier.

Diablo · Oct 20, 2024

About to inherit £40 billion....my smart arse lawyer says if he charges me £40 billion I will have no IHT to pay.......Sounds good to me,can the sages on NSC confirm this is correct before i go ahead

A mex eyecan · Oct 20, 2024

Shropshire Seagull said:
If the house is owned by the elderly relative I would assume the sale proceeds would go into their estate, and with permanent care, get chewed up in care cost fees?

yes they will, however their estate is very large and they will have to self fund until their end. Even without selling the home.

A mex eyecan · Oct 20, 2024

CoolTed said:
I think that selling a property before death could mean losing the residence nil-rate band benefit, if that's relevant in your situation.

there won’t be a nil rate band as there is no children for it to be left to.

A mex eyecan · Oct 20, 2024

Westdene Seagull said:
As you say - a very extreme example and one that would be picked by the solicitors involved along with Land Registry - and remember the big database @Shropshire Seagull has described that is linked to LR.

The system at the moment means estates get taxed when they shouldn't. Just to use my parents estate for example - all the properties combined sold for more than £100k less than they were valued at. Reason being that each and every one, at point of survey, needed work doing.

Tax of any kind should be paid based on true values. You don't pay a guessimate on VAT, Stamp Duty, Income Tax, Fuel Duty .... why IHT ?

Can you not make a claim back for overpaid tax? I was under the impression that with IHT if you under valued amount payable in IHT when the estate is finalised if HMRC would make you pay the under payment plus interest, and if you overpaid then that could be claimed back.

Weststander · Oct 20, 2024

Herr Tubthumper said:
assuming you mean the sale value, this is not necessarily true. If you sell assets for less than they are worth you could be asked to pay CGT on their market value.

And are.

drew · Oct 20, 2024

sagaman said:
Thats not true

Sorry, don't follow! Hugo Rune was suggesting some legislation and merely commented that I thought it was a bizarre idea!

Paulie Gualtieri · Oct 20, 2024

Shropshire Seagull said:
Allow me to introduce the HMRC Data Capture Data Match system.

All the countries who have a reciprocal tax treaty (the list is quite extensive) share information. Yes there are a couple of tax havens still out there but generally speaking, most countries are now very financially joined-up.

I'm not permitted to explain any detail of DCDM, but as a summary, it generates a global financial portfolio footprint of every UK tax domicile, the IT side of this system has been in place many years. The problem is, there is no way HMRC could resource investigation of every individual who may have underpaid (accidently or intentionally) some of their tax liability.

What it does do is calculate a "potential yield" of tax to decide a risk-score and only the cases that generate the highest risk score will/may be investigated.

"Throughout their lives" is interesting. HMRC use the seven-year rule for income/tax investigation. But retention for ALL pension data is the life of the pensioner + 10 years. I don't know about all assets but all names on property deeds are fed into DCDM. So if you gift (or sell for a £1) the new property owner will be known to DCDM.

It's quite a big-brother, the only area it struggled with is money-laundering where zero assets or financial records leave no trail - but there are other systems that exist to (try to) address this - nuff said.

I work for a bank and as you’d expect we have a heavy HMRC and international reg reporting footprint on personal assets alone.

It’s also now a corporate (in addition to personal) criminal offence to assist the facilitation of tax evasion which has tightened things up certainly in the legal and accountancy sectors

Paulie Gualtieri · Oct 20, 2024

Weststander said:
Interesting, that makes sense. I know at least two households who in the last year 5 years go away with grossly undervalue valuable house conveyances to family. In terms of IHT, I wouldn’t know about the stamp duty side.

For now….

A1X · Oct 20, 2024

Diablo said:
About to inherit £40 billion....my smart arse lawyer says if he charges me £40 billion I will have no IHT to pay.......Sounds good to me,can the sages on NSC confirm this is correct before i go ahead

Tell him he has 1 week to spend £1bn to unlock the rest else you keep that money

dazzer6666 · Oct 20, 2024

Shropshire Seagull said:
Is the roll of the dice many folk play ....
I should add that HMRC also do a quota of randomly selected investigations as well, so even the small-change tax dodgers might be at risk of an investigation.

In essence, evading taxes is a gamble, you might get caught, you might get away with it.
I expect most of us have experience of e.g. sole traders who may do a bit of cash-in-hand to knock of the 20% VAT.
So, absolutely, HMRC cannot resource to investigate every case. So they do a mix of possible high yield and random.

As Fletcher (from porridge) used to say: "If you can't do the time, don't do the crime."

And HMRC fully endorse the mantra of "Ignorance is no excuse for the law"

Yep…..I’ve had one random check but my SA returns were always simple.

drew · Oct 20, 2024

Diablo said:
About to inherit £40 billion....my smart arse lawyer says if he charges me £40 billion I will have no IHT to pay.......Sounds good to me,can the sages on NSC confirm this is correct before i go ahead

Is the solicitor living in Nigeria by any chance? This seems a reverse of the normal scams where the money comes the other way (supposedly)!!!

Shropshire Seagull · Oct 21, 2024

dazzer6666 said:
Yep…..I’ve had one random check but my SA returns were always simple.

My one-man contractor limited company was VAT investigated about 10 years ago.
For those of you who know HMRC VAT schemes, I was on the Flat Rate Scheme + Annual.
VAT can't be any more simple and straightforward than those.
You charge VAT on your invoice at 20% and then pay VAT to HMRC on all Invoiced receipts, 17.5% for my industry IIRC. Simples.
Still had me bricking it though, even after my accountant confirmed all was in order and I had nothing to worry about.
The investigator went though my bank statements for the full fiscal year totting up all the credits (paid invoices), did the % calc and confirmed I had paid all VAT as required .... phew!

BrightonCottager · Oct 21, 2024

A mex eyecan said:
there won’t be a nil rate band as there is no children for it to be left to.

Is there no will that leaves the property to another beneficiary? I would have thought that the estate is liable for IHT, however that works out. That could be complicated if there's no will. See my post #373 about preserving residential Nil Rate Band if 'downsizing' into a care home.(@A mex eyecan and @Shropshire Seagull might be interested too)

EDIT: Correction: Residential Nil Rate Band only applies to direct descendants (children (including adopted, foster or stepchildren) or grandchildren), not other beneficiaries. It still makes sense to make sure you an up to date will!

A mex eyecan · Oct 21, 2024

BrightonCottager said:
Is there no will that leaves the property to another beneficiary? I would have thought that the estate is liable for IHT, however that works out. That could be complicated if there's no will. See my post #373 about preserving residential Nil Rate Band if 'downsizing' into a care home.(@A mex eyecan and @Shropshire Seagull might be interested too)

you may be right, but i was under the impression every one gets 350k, but if you leave property to children and or grandchildren you then get the lifetime allowance of extra 125k, but not otherwise. I could well be wrong

EDiT
probably not much point in getting our heads round this anyway as it’s like to all get thrown up in the air at the budget

Brian Fantana · Oct 21, 2024

A mex eyecan said:
you may be right, but i was under the impression every one gets 350k, but if you leave property to children and or grandchildren you then get the lifetime allowance of extra 125k, but not otherwise. I could well be wrong

This is how I understand it too. It is certainly how my parents have set up their estate(s).

drew · Oct 21, 2024

A mex eyecan said:
you may be right, but i was under the impression every one gets 350k, but if you leave property to children and or grandchildren you then get the lifetime allowance of extra 125k, but not otherwise. I could well be wrong

EDiT
probably not much point in getting our heads round this anyway as it’s like to all get thrown up in the air at the budget

Threshold is £325k. If you leave family home to children then it can go up to £500k (£1m for a couple).

If one partner died 30 years ago and left everything to the spouse and now the spouse has died, I believe the effective threshold, ignoring the family home is £650k (the threshold for the partner that died first is the one applicable now, not the one at the time of death). If you include the family home going to children then it is £1m. Hence the reason so many are not actually affected by IHT yet still get agitated by it.

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[Politics] Inheritance Tax

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