Inheritance/Death Tax in the UK? Is this for real?

[Big Tav]

I am moving over there soon from Australia and my friend has just told me something which I couldn't believe! I hope it's wrong.

When you die you have to pay 40% of your assets to the Government? Surely not! So if I get a mortgage, work all my life paying tax, pay the interest over 30 years and finally own my home. I can't just relax and know that my kids will get it? They will lose a further 40%?

So if I have a house worth £500,000 when I die that I own outright £200,000 of that goes to the government? If my kids are well off when I go i can't just leave them the family home they would have to get a loan just to keep what I already own? If so, this is an absolute JOKE! I understand you have to pay taxes but if I own it after paying it off over my lifetime my kids can inherit a debt because of it? Their only choice would be to sell it then and only get the $300,000 (- commission for selling to I bet!)?

Have I been told this correctly? How do you get around that? I am sure there are strategies.

Hear from you all soon!

[ascayman]

nearly, you get the first £325k 'free'

[Big Tav]

I'm Aussie and my wife is Scottish.

What you are saying is that my kids get £325,000 tax free then pay 40% tax on the remaining £175,000? This means they will have to pay £70,000 in tax. Have I got it right?

[Eric Mc]

Big Tav said:

I'm Aussie and my wife is Scottish.

What you are saying is that my kids get £325,000 tax free then pay 40% tax on the remaining £175,000? This means they will have to pay £70,000 in tax. Have I got it right?

No. They just get their hands on the estate AFTER the tax is deducted. They normally don't have to physically pay the Inheritance Tax.

We've had these types of death related taxes in the UK for over 100 years. They used to be called Death Duties but for the past 40 odd years have been referred to as Inheritance Tax.

With careful tax planning, IHT can be legally avoided.

Next time you visit a stately home in the UK that is owned by the National Trust, you can bet your life that the National Trust acquired the property as part of a Death Duties/Inheritance Tax dodge.

Edited by Eric Mc on Monday 11th October 14:32

[Big Tav]

So if they get it after the tax has been paid, this means the house must be first sold? They can't keep the family home unless they can pay up right?

[Eric Mc]

Big Tav said:

So if they get it after the tax has been paid, this means the house must be first sold? They can't keep the family home unless they can pay up right?

That is sometimes the case.

The vast bulk of people in the UK never end up paying Inhertiance Tax as the estate being left on death is valued below the tax thresholds.
Those who are exposed to IHT usually take precautions prior to death to ensure that any estate remaining in their possession on death is below the taxable thrsholds.

Those who get caught out atre those who died suddenly before any such plans were put in place or those who actually were not concerned about the matter.

[DonkeyApple]

Big Tav said:

I am moving over there soon from Australia and my friend has just told me something which I couldn't believe! I hope it's wrong.

When you die you have to pay 40% of your assets to the Government? Surely not! So if I get a mortgage, work all my life paying tax, pay the interest over 30 years and finally own my home. I can't just relax and know that my kids will get it? They will lose a further 40%?

So if I have a house worth £500,000 when I die that I own outright £200,000 of that goes to the government? If my kids are well off when I go i can't just leave them the family home they would have to get a loan just to keep what I already own? If so, this is an absolute JOKE! I understand you have to pay taxes but if I own it after paying it off over my lifetime my kids can inherit a debt because of it? Their only choice would be to sell it then and only get the $300,000 (- commission for selling to I bet!)?

Have I been told this correctly? How do you get around that? I am sure there are strategies.

Hear from you all soon!

But the alternative would be to be an Aussie. 40% is very cheap

[Welshbeef]

Tax planning as eric has said can avoid it all

another thing is gift it early but if it's a house and your wanting to keep living there that's not an option unless you pay them the going rate rental for the house...
The other thing is it's your family home they will have their own family homes and memories are often best remembered than lived in.
If it's a house you built I guess that's different but if it's a normal house what's the reason they would want to live in it? They could sell their own house to move into the family home and pay the iht.

Or you earn more cash or you spend less now then that cash will pay the iht..

But if they are doing well in life they don't need your help you could do the amazing thing of giving it to a worthwhile charity to those who really need it and only give them sentimental stuff.

I know I'm not getting a penny it's going to MS and cancer charity. I remember the day I was told initially I was really gutted p&ssed off but then after a while thought of all the good it would do and I don't need the help. I got over that surprise after a short while but glad I know now rather than after. Do I act any differently not at all would I do the same I'd consider it based upon if we have kids and if they were fine quite possibly. Actually think it would give you such a feeling of doing good and helping those who really are in need.

Seriously consider it

[auditt]

Eric Mc said:

Big Tav said:

I'm Aussie and my wife is Scottish.

What you are saying is that my kids get £325,000 tax free then pay 40% tax on the remaining £175,000? This means they will have to pay £70,000 in tax. Have I got it right?

No. They just get their hands on the estate AFTER the tax is deducted. They normally don't have to physically pay the Inheritance Tax.

We've had these types of death related taxes in the UK for over 100 years. They used to be called Death Duties but for the past 40 odd years have been referred to as Inheritance Tax.

With careful tax planning, IHT can be legally avoided.

Next time you visit a stately home in the UK that is owned by the National Trust, you can bet your life that the National Trust acquired the property as part of a Death Duties/Inheritance Tax dodge.

Edited by Eric Mc on Monday 11th October 14:32

Eric,

When a tax advisor or accountant has worked out a "scheme" to get round IHT do they have to tell HM-REVENUE on the way round the IHT?

[Eric Mc]

Yes. HMRC need to be advised of al;l newly constructed tax avoidance svhemes.

If the advisor is using an already existing method, then he/she does not need to separately advise HMRC.

[auditt]

I thought that was the case
Thanks ERIC

[MKnight702]

Having assisted as an Executor of a will I can also confirm that you cannot distribute any assets until the HMRC theft has been paid in full.

It's great isn't it, I work hard to earn money, upon this I pay tax. From the net I buy essentials upon which there is tax (not always admittedly), I save up any spare cash and earn interest which is taxed. If I use these savings to buy an asset or investment that appreciates I pay tax on the increase. If after paying out all this tax I die with an estate worth more than £325k including the house that I had to scrape together enough cash (after paying taxes) to buy, then the Government want another 40% of the gross.

How many times do they want to dip into my pocket?? Don't tell me I don't want to know.

But hey, it could be worse, they could waste the money.......

[mxspyder]

This needs to be taken in context, the UK average house price is Circa £180,000, so you are going to have to go some way to even start paying Death Duties on the average estate.

There are of course other public funds differences between Oz and UK. The average salary in Oz will return approx 29% to the public purse (Tax and Superannuation) where as in the UK the average salary with return approx 26% (Tax and NI).

And then of course there is the National Health Service service.

Edited by mxspyder on Tuesday 12th October 18:40

[BarnatosGhost]

what is the problem with it?

Inheritance is a form of income - you pay tax on it.

fathers and sons are two different people, what belongs to one doesn't belong to the other, and when assets are transferred between two parties there's almost always a tax to pay - why shouldn't there be one here?

[auditt]

BarnatosGhost said:

what is the problem with it?

Inheritance is a form of income - you pay tax on it.

fathers and sons are two different people, what belongs to one doesn't belong to the other, and when assets are transferred between two parties there's almost always a tax to pay - why shouldn't there be one here?

Well i disagree
But from this comment i guess we'll never agree on "topics" like this

CASE A; Parents work hard to get that nice house, mortgage free and in the end want to pass it down to there kids and you think its right for the goverment to take 40%

CASE B; Do you think its right people watch mr kyle every morning at 9.30 (maybe one episode they might be on it) getting a weekly wage, living for bugger all?

So the parents of case A worked hard, lived within there means, struggled and in the end all they want to do is hand the house over but instead you think the kids should be landed with a 40% tax bill to pay for the wasters in case B

Good luck to everyone getting around this insane TAX

[hyperblue]

auditt said:

CASE A; Parents work hard to get that nice house, mortgage free and in the end want to pass it down to there kids and you think its right for the goverment to take 40%

CASE B; Do you think its right people watch mr kyle every morning at 9.30 (maybe one episode they might be on it) getting a weekly wage, living for bugger all?

So the parents of case A worked hard, lived within there means, struggled and in the end all they want to do is hand the house over but instead you think the kids should be landed with a 40% tax bill to pay for the wasters in case B

Good luck to everyone getting around this insane TAX

Umm that's pretty much how the whole tax system works?

I don't agree with IHT, but it's easy enough to avoid with a bit of sensible planning.

[Olivera]

A very fair and just tax.

[Big Tav]

It's absolute robbery. Especially when it's already been taxed so heavily to acquire it in the first place.

[Fittster]

Big Tav said:

It's absolute robbery. Especially when it's already been taxed so heavily to acquire it in the first place.

And you won't be using any public services?

The problem in the UK is we pay to few taxes for the services the state provides. Something has got to give

[Big Tav]

Don' get me wrong, I have nothing against paying tax. Its more tax being paid on something that has already been taxed heavily throughout my entire life that bugs me.