Inheritance Tax

In message , Mark writes

Why should that be a problem?

How much is the house worth?

I see that John has explained the technicalities.

But I must say that I can never understand why a widowed person needs or wants to stay in the million pound, 5 bed detached, with an acre of garden, house that they brought their family up in Nor do I understand why other people accept that they are going to do so without questioning whether it is sensible.

This is especially so when they have no other form of investment that they might draw on to produce an income (as in your premise above).

Doesn't it seem immediately obvious that it might be desirable to trade down into something more suitable to the lifestyle of the individual and do something more useful with the capital produced.

Of course, few people live in such houses, but if you don't then you aren't likely to be suffering the problem we are discussing

tim

What about someone living in a 300-400k house, perfectly fitted to their cicrmstances, only slightly too large? tax is affecting people like this, even though these are perfectly ordinary costs for houses these days. Trading down wouldnt produce much if any income, esp with all the large costs (including stamp duty, producing a "double whammy effect").

As we are specifically discussing the effect of (no) tax on spousal transfers here, if one had a house of this value on first death the likelihood is that the financial circumstances of the remaining partner would change quite considerably (one way or the other) before they died.

In any case, I do think that it is possible for a single person to downsize from a 300k House (should they financially need to). Even at the current market level there aren't many places where perfectly acceptable 2 bed ground floor flats with communal gardens aren't available for under 200K within a 5 -10 mile radius. I think that you are overstating (considerably) the costs of moving.

I don't think it un-reasonable to expect people to live in such properties (if they can't afford otherwise) and certainly don't see any reason why I should have to pay more (something else) tax so they they don't have to.

tim

5-10 mile radius? Thats a hell of a distance for an older person who has likely built a good relationship with the nearby neighbours, knows the area, local shops etc, who has the people they know locally looking out for them. Who has their house set up for easy maintenance, with neighbours they like, in an area they like. I dont think you have given any thought for the effect it would have on their day to day existence. Plus the cost of doing that move would probably be in the region of 10k without taking into effect the need to perhaps redecorate, buy new furniture, etc. Thats a big chunk out of the money they are releasing. Would you put money in an investment fund if it lost 10-20% on day one?

Another POV is, why should they subsidise your lifestyle? Even 5 years ago, a esatte which would would have been nowhere near taxable values on death, now may easily fall into that area. The government is taking a lot more tax all of a sudden so I dont see where your argument about you having to pay more comes from? Why should it fall on one set of people, and force them into destroying their local friendships and knowledge. These are people who are driving less and less, reliant more on public transport, where 5-10 miles might as well be 100 miles away, when you can just pop next door to see your neighboutr but you need to takea 30 minute bus ride (if there is one)

We arent talking about the person in the 5 million pound mansion here, just Mr&Mrs Average, who the government has suddenly started penalising.

Maybe it is, but if they decide that there are financial reasons why they don't can't live in the current house what choice do they have?

Oh yes, it's campaign for a change in the Tax rules so that I don't have to sell.

Of course I have. People have to move all the time (even old people). I see no reason why we should change 20+ years of tax rules so that some don't.

I still think that you have over estimated the cost.

In what way have I asked them to do this. I am not asking for the tax rules to be changed I am working within the ones that we have.

I answered this point in my first post. The dead person doesn't pay the tax, the reciepient(s) do.

Because NL aren't collecting enough (for their policies) If they reduce one tax another will go up.

Because that was the rule when they moved in.

I'm sorry but I just don't see any problem with having to pay tax on the value of your house when you die.

the owner has two choices:

1) accept that the tax has to be paid 2) find a way to mitigate it, which might include moving.

I'm not saying that they have to move. Only that they might have to move if they don't accept option 1.

Paying tax when you are dead is not being penalised.

You are dead, you cannot suffer any more.

(and TBH I think that the money that people have acquired by rising house values is an unjust enrichment but that another issue. And no I'm not making this comment because I haven't received this enrichment).

tim

Why stop at 40% then, why doesn't the money grabbing Government take the lot. This Government wont be happy until everbody in the country pisses their incomes up against the wall leaving diddley squat.

Kevin

But taking less tax from people who are fortunate enough to inherit means taking more tax from those of us who have to earn our money. I know which I think is fairer!

In any case, forcing people to piss their money up against the wall instead of going without just so that their offspring can have an inheritance might not be such a bad thing. If things carry on they way they are we'll end up as a two tier country with only those who inherit a property able to own one.

Jeff

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Those financial reasons are (often) purely tax-related - if we agree that it's generally a bad idea to invest purely for tax reasons, then...

You (They, the property-rich, cash-poor widows, or their heirs/executors) wouldn't have to sell if the folks who owned the houses had: (a) not been so long on residential property (b) moved to a 1-bed flat and given the rest away in PETs or stuck it all on AIM shares/forests/farmland/etc. (Does that meet the 'more useful things to do with the capital' criteria?)

As someone whose parents haven't moved house since 1968, and may inherit a useful amount (or a nice house[0]) in the next 20 years, I can see an arguement for excluding PPR from IHT.

The prospect of a tax burden should not *force* the surviving partner to give up the emotional atattchment to what may have been a family home for forty years.

rgds, Alan [0] If I could buy my siblings out, I might like to move back there.