Have The Torys Shot Them Selves In The Foot.

I recently heard that Inheritence tax was getting a re-vamp. Only estates over the value of 1,000,000 pounds, alot of money-ish. So how much money is going to be lost from only 1 mil+ estates being taken, surly they've shot them selves in the foot here. Whats going to go up ? Income tax ?

Theres a link if you want to read more.

ProTo

IIRC it is only 4% or 6% of all estates that are liable for inheritance tax over a threshold which is currently £300,000.

This threshold limit is regularly raised (and has been regularly raised by the Labour Gov since 1997).
It was raised in the last budget to £300,000, it is going to be raised to £312,000 in 2007-08 and it will be raised further to £325,000 in 2009

The impression that the tory-supporting press love to give (that this issue is one 'most people' are concerned about) is patent nonsense.
Well over 90% of us will never face this tax and have never faced this tax.

Rising house prices are often cited as the reason why 'people' feel so concerned, I reckon it's pure BS.

When people sit down and give the matter some serious thought I don't believe for a moment that anyone (outside of the tiny % at the very top of the income/wealth bracket) have any serious need to worry about this.
The people are being conned into pretending interests which are not their own somehow are.

......and if that is the big 'springboard' the tory party think they are going to use to get into Gov then I am 100% certain they could not be more wrong.
But great.
The tory party and their friends in the press show their true colours once again.
Frankly I'm quite glad they are doing this cos IMO the more people have this placed before them to give actual serious thought to (as opposed to the tory press' sycophantic garbage ramblings) the more 'most people' will laugh at this and the notion that it is a pressing 'issue' for them.

It's just the troy party trying to look after the already most well off & most priviledged.......as usual and as usual at the expense of the rest of us.

[edit on 5-10-2007 by sminkeypinkey]

reply to post by ProTo Fire Fox


The Tories have pledged that all of their tax reform promises are fully costed and affordable, this being an essential plank of their policy statements firstly because they have already claimed that they will maintain the present Government's public spending levels and secondly because they are painfully aware that in the past they have been routinely accused of making wild tax cutting promises which could not be achieved without cutting spending.

Therefore, in order to offer this large rise in the IHT threshold and another tax cut which will reduce stamp duty for first time house buyers, (and unlike Sminkey I do believe that both of these measures have some merit), George Osbourne has had to declare how he will raise the lost tax revenue and you are very right to question whether or not he can achieve what he says he can.

He plans to raise the lost tax revenue by charging a flat rate of £25k per annum on a class of resident called "non-domiciled". These people generally range from wealthy to obscenely wealthy and currently pay little UK income tax so all is good so far, but there is a problem. Because of the difficulty in identifying the foreign earnings of these people there are no reliable estimates of how much such a move would raise and there are real fears that such a move would encourage many of them to leave the UK rather than pay the levy.

Now, the nice Mr Osbourne reckons he will raise £3.5 billion through this process but the Treasury will only commit to a figure of around £650 million and warns that they are not confident of the reliability of that figure.

So, have they shot themselves in the foot? The simple answer in financial terms is that nobody knows because nobody can be sure of how much the levy on "non-doms" will raise. However, what the debate has shown is just how fast and loose the Tories are prepared to be with their pledge of fully funded tax reform promises and we haven't even started on an election campaign yet.

Up to a sane point I have no problem with the idea of a stamp duty cut (although I have the feeling it just gets swallowed up by the vendors as they adjust prices to reflect the new reality.......I'm not so sure people really mean that to be the result of the policy but that's what will happen).

Stamp duty only begins on homes costing £125,000.....it's also notable that Labour's raising of the limits in 2005 were the first since 1993.

It is also only 1% of the addition between that £125,000 and £150,000.....by far the majority of homes in the UK - the average house price of all homes in the UK in 2006 was £150,000.
(although homes built on 'disadvantaged' land get a 0 rating to £150,000) .
Between £150,001 and £250,000 SD is 1%, £250,001 - £500,000 it is 3% and over £500,000 it is 4%.

New measures were brought in so that from 1 October, new zero carbon homes will benefit from an exemption from SDLT for the first £500,000 of the purchase price.

Wiki has a readable history for those interested in a look.

link

It's worth noting that tucked in amongst the recent tory proposals was a pledge to abolish stamp duty on shares......but they weren't so keen to trumpet that one so loudly.
I wonder why?

Osborne's first tax cut will be stamp duty on shares

The first tax cut by an incoming Conservative government will be the abolition of stamp duty on shares.

The move is expected to give an immediate £150 billion boost to the stock market and help repair the damage caused by Gordon Brown's "pensions stealth tax".

link to Telegraph

Equally up to a sane point I have the same feelings as most about IHT......but a starting point of £1 million!?

The issue is at what point this leaves the realm of being an issue for the vast majority of us and starts being solely in the interests of the already most privileged and well off tiny and wholly unrepresentative minority.

None of us particularly likes having to pay taxes but it's a necessary cross we all have to bear (and thanks to the tory shift in UK taxation to indirect taxation almost everybody save the youngest are taxpayers now).

I mush admit I do find it pretty amusing to see people so willing to believe the tory party (despite their history) can magic up some easy & painless tax-cuts.

No doubt Labour will listen & simply move somewhat to give people what (they at least say) they want, so I'd expect some moves to up the IHT limt and cut stamp duty in the next budget.

But nevertheless, as we can see with the shares proposals, it is pretty clear that the tory approach is towards benefitting the most well off, not the majority, as per.

A similar debate has been ongoing here in the U.S.

I think these estate taxes should totally be abolished, no limit. If you work making money all your life that you pay taxes on, why should whatever you saved be taxed again when you die before it is passed on to your heirs?

Originally posted by djohnsto77
If you work making money all your life that you pay taxes on, why should whatever you saved be taxed again when you die before it is passed on to your heirs?

- Well that's the point.
Excepting a very few (all of whom have the means to make 'tax efficient' plans for their surviving relatives whilst alive) once you go over a certain amount the likelihood of that wealth actually being accumulated by actual 'work' is less and less.

I don't think anyone is saying everything should be taxed away and grabbed by the state on a successful person's death.
But nevertheless there is such a thing as 'society' and the wider interest.

Over a certain limit and subject to the ability to 'make preparations' (in the UK at least all of which are very generous......basically anyone wealthy enough to afford a good accountant will not be paying much tax period) I don't see this being the issue some want to claim it is.

If people wish to make up the shortfall in general taxation that would be another matter & a valid view but for our political parties to pretend or encourage a view that this is an easy & cost-free exercise is IMO crass opportunism (and worse, they know it too).

Originally posted by djohnsto77
If you work making money all your life that you pay taxes on, why should whatever you saved be taxed again when you die...

Despite popular outrage there's nothing unusual about income being taxed at multiple levels, (for instance, business profits are taxed before distribution to shareholders when they are taxed again as personal income and then again through indirect taxes on consumption), so there's no obvious reason why there should be no capital taxes on inheritance in my view.

...and let's face it, despite the mechanism used in practice, in reality the person being taxed in this instance is not the person who has worked hard all their life, they are dead, the tax falls on the estate being passed to his heirs who have probably done little or nothing to accumulate this wealth.

However, there is a particular problem with property values which have accelerated at a rate far in excess of any indexation of IHT with the result that many perfectly normal families find that their homes are putting their estates into the IHT regime.

A four bedroomed house in my area is now routinely costing in excess of £300k and whilst that is undoubtedly a comfortable house it is far from opulent. What is more is that it is indivisible which means that it may be essential to sell it in order to liquidate cash to pay IHT which restricts the options of heirs to remain in family property. The situation also has a very powerful regional effect with property prices London and the South East of England meaning that the tax bites far harder in these areas than elsewhere.

Now, I'm not going to suggest that this is anywhere near the great social ill that some Tory commentators would have you believe and the grandiose gesture of proposing to increase the threshold to £1 million was little short of an obscene over reaction calculated solely to grab headlines ahead of an election that never came, but a significant increase to around £500k would have made sense and been socially defensible.

However, as Sminkey says, a cost free tax cut is the very rarest of beasts and this certainly isn't one. The Tories still have to face the question that they never want to answer; "if you reduce taxation which services will you cut to pay for it?"

Well there's an end to this.

From today's Financial statement......

IHT to be transferrable between married couples, widows and widowers (and civil partnerships) backdated indefinitely.
£600,000 this year and £700,000 by 2010.

That's 97% of the value of all homes in the UK.

Besides being a pressure group on a few issues what on earth are the tory party now for?

Full text of the statement here

[edit on 9-10-2007 by sminkeypinkey]

Yes, that's good, and the approach of using transferable allowances targets exactly the issue I was concerned about above, i.e. the indivisible nature of the family home, whilst not giving the excessive relief proposed by Osbourne.

A flat rate 18% on CGT is interesting though. I have a feeling that a few avoidance wheezes will be explored to try and exploit a 22% marginal rate advantage over income tax.

Of course we will have to put up with a few weeks of complaints about "stealing policies", but coming from a party which has based it's entire future on purloined policies and an image straight from from the Labour Party song book that is a little rich. Mind you, if it means that they stop using the now utterly overplayed and very boring "stealth tax" mantra for a bit then we should be thankful I suppose.

It is worth pointing out that fpr all the heat and noise on this assests left to a spouse always were exempt from IHT tho.

Inheritance tax is currently charged at 40% on all assets worth more than £300,000 which are left behind when someone dies - though assets left to a spouse are exempt from the tax.

Mr Darling's said the announcement allowed 12 million married couples and civil partners to combine their allowances.

This means that when the second partner dies, inheritance tax will not be charged on the first £600,000 of their estate, provided none of the allowance was used when the first partner died - for example if items were left to children or other family.

The benefit will be backdated indefinitely for widows and widowers, giving those who have already lost their partner the ability to take advantage of the combined allowance.

Mr Darling said 97% of UK homes were worth less than the new threshold.

And he added that in future years, both house prices and inflation would be taken into account when setting the level at which inheritance tax would kick-in.

INHERITANCE TAX
IHT is a form of death duty on estates
It was set at £300,000 but has been raised to £600,000 for couples
Above that threshold they are taxed at 40%
About 40,000 estates a year are subject to IHT
It includes the value of a house - unless it is left to a UK-domiciled spouse
Assets given away in the seven years before death are subject to IHT

BBC link here