Financial literacy

[JackSomething]

It's all very well to talk about the high ceiling when leaving to your children or grandchildren etc, but what about those who have none?

My Uncle sadly passed away last year and we discovered he had kindly left everything to my sibling and me. He never married or had children and left behind a very decent amount of savings and a house in an expensive area of Swansea.

As a result, the taxman took a very decent 6 figure sum out of it. I'm not crying about it, I wasn't expecting the inheritance and it's still a lot of money that will make a positive difference for me and my family. Does sting a bit to see so much go to the taxman though, so I would have welcomed a cut in inheritance tax before this.

Appreciate this maybe a niche example, but it's my experience and so a cut would surely help some people in a similar position.

 

[rockinj]

The reality that you’re highlighting Jacksomething is that when it impacts the individual and the family people take a very different take.

That again feeds into what I’m talking about those that don’t have tend to want to take from those that do. It’s not altruist in the slightest. It’s definitely a form of envy.

I can see both sides on this one. I personally do believe the system should reward work not inherited wealth. However I would want what is best for my family. I doubt many on here would happily pay an IHT bill if they were in that position.

It’s like taxation generally people don’t want to pay more taxes they want others to pay more taxes. In reality to have good public services everyone has to pay more taxes. But try selling that.

 

[J_B]

Unless they're fabulously wealthy, most people find it easy to avoid inheritance tax if they give it some thought and take readily available advice.
It has been described by accountants as a voluntary tax for that reason.
Some people don't even think about it and many are asset rich (house) and money poor so they would be surprised to find that their estate will attract IHT.

 

[Londonlisa2001]

It's all very well to talk about the high ceiling when leaving to your children or grandchildren etc, but what about those who have none?

My Uncle sadly passed away last year and we discovered he had kindly left everything to my sibling and me. He never married or had children and left behind a very decent amount of savings and a house in an expensive area of Swansea.

As a result, the taxman took a very decent 6 figure sum out of it. I'm not crying about it, I wasn't expecting the inheritance and it's still a lot of money that will make a positive difference for me and my family. Does sting a bit to see so much go to the taxman though, so I would have welcomed a cut in inheritance tax before this.

Appreciate this maybe a niche example, but it's my experience and so a cut would surely help some people in a similar position.

Yes, if you have no direct descendants the limit is £375k for a single person and £750k for a couple as the property goes elsewhere.

But the reality is you said you weren’t expecting it and it’s a lot of money. So helping people in that position surely should be a far lower priority than helping those who earn minimum wage and pay tax on it? Given we need to raise taxes from somewhere.

It’s equivalent to a windfall.

 

[Londonlisa2001]

The reality that you’re highlighting Jacksomething is that when it impacts the individual and the family people take a very different take.

That again feeds into what I’m talking about those that don’t have tend to want to take from those that do. It’s not altruist in the slightest. It’s definitely a form of envy.

I can see both sides on this one. I personally do believe the system should reward work not inherited wealth. However I would want what is best for my family. I doubt many on here would happily pay an IHT bill if they were in that position.

It’s like taxation generally people don’t want to pay more taxes they want others to pay more taxes. In reality to have good public services everyone has to pay more taxes. But try selling that.

Well I have a large house in an relatively expensive part of London and no children so it’s difficult to see how it could have a more direct impact on me / my estate in due course and I don’t want to see it changed for reasons I’ve explained. I believe the thinking of this government at the moment across this and so many other areas makes for more and more wealth inequality and I simply don’t agree that it benefits anyone at all in the longer term.

I’m a firm believer in the notion of designing tax systems (or all government really) based on the veil of ignorance. If, prior to your birth, you designed a tax system not knowing what sort of financial and socioeconomic position you’d ever find yourself in, whether one of the majority that have a lot less or the minority that have a lot more, what would you do?

Designing systems that are disproportionately advantageous to the few would surely be the thing you’d avoid?

 

[Londonlisa2001]

My wife has set up a trust to avoid IHT. She'd be bemused at being described as super rich (she's a teacher).

No one has described her as super rich.

But the reality is that she must have individual net assets that are worth in excess of half a million quid assuming she has children or £375k if she doesn’t (and enough over that to make it worthwhile to set up a trust). And irrespective of her being a teacher or anything else that makes her a lot ‘wealthier’ than the majority of the U.K. population.

 

[JackSomething]

Yes, if you have no direct descendants the limit is £375k for a single person and £750k for a couple as the property goes elsewhere.

But the reality is you said you weren’t expecting it and it’s a lot of money. So helping people in that position surely should be a far lower priority than helping those who earn minimum wage and pay tax on it? Given we need to raise taxes from somewhere.

It’s equivalent to a windfall.

One of the executors on the will is a solicitor and he thought at one point that we could choose to donate what would have been the IHT to a charity or charities of our choice instead. We were all for that until he looked into it and realised he was mistaken!

It is equivalent to a windfall and that's why I'm mostly not that angry about it (I realise I must appear otherwise on this thread). I also agree that we have to raise taxes somehow and I'm all for progressive taxation. I challenge anyone to not get a little annoyed at seeing a 6 figure amount go to the government rather than themselves in one lump sum though!

 

[Londonlisa2001]

One of the executors on the will is a solicitor and he thought at one point that we could choose to donate what would have been the IHT to a charity or charities of our choice instead. We were all for that until he looked into it and realised he was mistaken!

It is equivalent to a windfall and that's why I'm mostly not that angry about it (I realise I must appear otherwise on this thread). I also agree that we have to raise taxes somehow and I'm all for progressive taxation. I challenge anyone to not get a little annoyed at seeing a 6 figure amount go to the government rather than themselves in one lump sum though!

Yeah, the estate is taxed before the money gets to you so there’s nothing you could do to avoid any part of it. Charitable gifts only have an effect when made by the estate rather than the beneficiary.

You weren’t coming across as angry - and I wasn’t attempting to come across as unfeeling - I agree it’s irritating beyond belief when it happens to you, but actually my annoyance at tax is not paying it but rather where it goes. I’m not irritated when it goes to providing healthcare or education or help for those who need it but I am irritated beyond all reason when it goes to cronies of the government for dodgy PPE deals. Even then though I’d rather it came from those who can afford it than coming from those who are absolutely on their ar*e and can’t afford to feed their kids. I am angry beyond belief that they’d look at this rather than an increase in the free allowance, or an increase in universal credit, or spending more on social care or whatever.

 

[Robbie]

Regarding a comment made earlier about my taxes giong to HMRC , and a reply it pays for education etc ,

Schools are crumbling with ROCC , infants in my local school are being taught in Portacabins , bussed in from miles away as no money for repairs , overcrowded classes and staff morale low .

Are my taxes letting me see a GP , no chance of that , jump through hoops even to contact Primary Care , brick wall follows .
Even if I am seen , referral to a Specialist in non existant , no Ambulance for a Hospital trip anyway if an emergency occurs .

The Hospital Staff I know are exhausted and sickness levels at record high , another good return on PAYE .

Police , another joke funded by me , Never see a Bobby on the Beat in my area now , plenty of PCSOs , cheaper alternative .
Crime figures masked and sugar coated on every report , people scared to leave their homes at night , another great deal .

I do not read the Daily Mail , these are all accounts of what I see on a daily basis , added to the annual Rate Bill for which I never see a road sweeper , roads are from the Third World and litter is everywhere .

So yes I am peed off about paying my taxes and getting nothing back , got a good idea where the money is going .

 

[Pentyrchjack]

I don’t believe tax should be universal. It should be progressive. A universal taxation is deeply unfair to those who have less. Given that the necessities of life are universal - you don’t need more heat or food or clothing the richer you are (you may want or have more but you don’t NEED more). And taxation on heat and food and clothes are the same whatever you earn (as VAT is not a progressive tax). So poorer people pay a greater proportion of their income on taxation of necessity than richer people do. Progressive taxation of other taxes, such as income tax or inheritance tax goes a little way towards evening out that unbalance, or unfairness.

On IHT, the ‘much higher threshold’ you mention of £1m is effectively the rate at which it starts if (a) there is a property involved and (b) you leave your estate to children or grandchildren and have lived in the family house with your spouse or civil partner.

All tax that you pay ultimately affects the beneficiaries rather than the deceased doesn’t it? If you paid less income tax you’d leave more money all else being equal. So that’s not a valid argument - it’s the estate that’s taxed not the beneficiary anyway. Same as your debts die with you as well, so swings and roundabouts…

It’s possible you do know children that have been forced out of ‘modest family homes’, but given you only start paying at £1m (in other words, an inheritance of £1.1m would only see tax charged on £100k not on the whole lot), and the average house in the UK is worth £290k it would be unusual. Even if there was one parent (in other words divorce had happened before the death of either of them) the allowance is £500k so again that almost double the U.K. average.

The thought by the way of me being fiscally ‘left of left’ will amuse many on here (Clasey for a start).

Lisa - There’s no point in asking people for their opinions if you then try to correct those who don’t meet your bias. You obviously believe equality is to make everyone poor, whereas I believe we should strive to make everyone richer. Nothing wrong with either perspective.

 

[Jack2jack]

Here's my tuppence worth.
For most folk that have worked all their lives, payed taxes. Worked hard to pay off their mortgage, payed all their bills and been good citizens, set aside a few quid to enjoy what little time they have left, after retiring, and might want to give their family and friends a little something when they pass. At what point has anyone got any right to take a massive chunk out of their money, fck off is it. Besides the IT is a drop in the ocean to the billions that have been spunked away by 'that' lot. Just leave us alone for god sake.
I care not if anyone agrees or not, it's just an opinion.

 

[rockinj]

Good thread this, nice to see more pluralism than the usual left wing backslapping.

 

[Londonlisa2001]

Lisa - There’s no point in asking people for their opinions if you then try to correct those who don’t meet your bias. You obviously believe equality is to make everyone poor, whereas I believe we should strive to make everyone richer. Nothing wrong with either perspective.

I wasn’t correcting you. I was giving my opinion.

And what I obviously believe has obviously passed you by.

How you make everyone richer by concentrating wealth at the top is beyond me. But what do I know.

 

[Londonlisa2001]

Here's my tuppence worth.
For most folk that have worked all their lives, payed taxes. Worked hard to pay off their mortgage, payed all their bills and been good citizens, set aside a few quid to enjoy what little time they have left, after retiring, and might want to give their family and friends a little something when they pass. At what point has anyone got any right to take a massive chunk out of their money, fck off is it. Besides the IT is a drop in the ocean to the billions that have been spunked away by 'that' lot. Just leave us alone for god sake.
I care not if anyone agrees or not, it's just an opinion.

‘ might want to give their family and friends a little something when they pass’.

The first million quid is free. Your idea of a little something and mine is obviously different. Or it goes back to what I was saying at the start. People just don’t understand how it works.

4% of people pay anything. 96% of people are being left alone.

We have to improve understanding on this stuff.

 

[rockinj]

Well I have a large house in an relatively expensive part of London and no children so it’s difficult to see how it could have a more direct impact on me / my estate in due course and I don’t want to see it changed for reasons I’ve explained. I believe the thinking of this government at the moment across this and so many other areas makes for more and more wealth inequality and I simply don’t agree that it benefits anyone at all in the longer term.

I’m a firm believer in the notion of designing tax systems (or all government really) based on the veil of ignorance. If, prior to your birth, you designed a tax system not knowing what sort of financial and socioeconomic position you’d ever find yourself in, whether one of the majority that have a lot less or the minority that have a lot more, what would you do?

Designing systems that are disproportionately advantageous to the few would surely be the thing you’d avoid?

I personally would dramatically overhaul the tax system, one of the first things I would do is create a NHS tax. Let’s see how many people think it’s “free” then