Inheritance tax rises and the Budget: who's affected? | IFS Zooms In

[@InstituteforFiscalStudies]

Thank you for watching, to see more of our work visit: ifs.org.uk/taxlab Timecodes: 00:00 Introduction 2:01 What is inheritance tax 4:23 What do other countries do? 6:40 Why is inheritance tax unpopular? 10:30 Threshold freezes 13:55 Changes to treatment of pensions 19:52 Farms 24:22 How many farmers will this affect? 27:40 Impact on family farms 33:20 Changes to business reliefs 35:28 Impact on businesses 41:30 Inheritance tax avoidance 45:36 Conclusion

[@neilmurray7401]

If the change to inheritance tax isn't going to raise massive amounts, then it must be an ideological decision on the part of the government.

[@jme_a]

The money that needs to be raised isn't going to be taken from a single policy change, there are dozens of changes that all contribute, including IHT. I'm not really sure what your point is...? Do you think they'll just raise all funds from NI or VAT or something? 😕

[@MrJudgementday99]

@@jme_athe point I believe they are making is that the Labour Party is just applying the tax as a punitive tax because they hate family farms

[@phueal]

Yes: it's ideological. Some ideology like "let's make the tax system make sense, let's make the economy more efficient, and let's crack down on tax avoidance."

[@geoffnewman3109]

Yes, the ideology is FAIRNESS.

[@Carlos-im3hn]

@@geoffnewman3109 It is definitely Double Taxation that can not be defended by one of the principals (as they are already deceased); is this fair ?

[@malonetv721]

Thoughtful discussion as always. I know it's a cliche but this stuff should really be taught in schools. It's frustrating how often politicians have to make inefficient decisions just to appease a poorly educated population.

[@nigelbradshaw1948]

IHT has needed an overhaul for a long time, so that everyone is treated fairly. I always recall covering the 5th Duke of Westminster who died in 1989, his estate was valued in excess of 5 billion but was only valued at 5 million for IHT. This was because of the large value of property held in trusts and the woodlands exemption. His successors have also benefited from this which seems inequitable. That’s without considering that not all wealth is earned by all, some wealth has been directly bequeathed from the monarchy to families, in lieu of their allegiance. The recent change to incorporate DC pensions also seems inequitable without considering the treatment of the different assets. Those in or preparing for retirement use pension pots to fund their living, with the inherent associated investment risks, whereas illiquid assets such as property are treated the same for IHT. A banding for each seems more equitable.

[@radiantinred]

It's only recently pensions were a vehicle for "avoiding" IHT. The budget removed this IHT loophole for people who had probably been "middle income" earners but the loopholes for the "really high earners / rich " remain. It doesn't make a huge amount of sense.

[@chrisduffill5248]

As always a great one , thank you

[@edwardmccabe815]

Thank you for an informative presentation. A few points on the inheritance tax changes to defined contribution pension pots. First, you made no mention about the fact that for many people pots have already been taxed at the rate of 55% on the surplus above the previous limit when the pension was first crystallized (until Hunt recently changed the rules). So there are effectively, for those pensioners who have already paid income tax on crystallization, on the surplus above the limit, and survive beyond the age of 75 years , three means by which HMRC will levy tax i.e. on crystallization, on drawdown, and on their estate upon death when their heirs pay income tax at their marginal rates. Second, given for almost all pensioners in their sixties there is (without a diagnosis of terminal illness) actuarially a very wide range of possible ages at death, almost all will drawdown at a rate that it is likely to leave a substantial residue remaining upon death. Third, the Chancellor described the change to pension pots as closing a "loophole". It was not a loophole as it was explained by Osborne et al, at the outset, that being able to pass on the residue on the pot was one of the few advantages of having a defined contribution pension instead of a defined benefit pension. As we know most people outside the public sector were then are still not now able to join a defined benefit scheme.

[@mthw]

There is one very easy change that would make IHT seems much less unfair that you didn't mention. Currently HMRC demands you pay your IHT tax bill within 6 months of the date of death. If you don't, then interest is charged. Having just gone through the process, it would feel much fairer if this time limit was removed and instead the tax is payable at the point probate is granted. The grant can then be tied to the tax being deposited. Currently probate can take a year or more, and without it there are restrictions of what you can do with inherited assets (including restrictions on selling them to help pay the tax bill!)

[@phueal]

Posted this last time but posting again because I'd love an answer! Please could you do an episode discussion Land Value Tax? Every time I hear an economist talk about it they seem to go all moon eyed, wax lyrical about how amazing that would be and what a shame it will never happen, and then move on to something else. Is it really that great and, if so, why haven’t we got one?

[@Carlos-im3hn]

Instead of the difficult and sometimes hard work of being creative and growing new industries, they attack heritage existential industries. The weak budget is obviously flawed. the new list: no families, no farmers, no food, no future.

[@frmcf]

"I struggle with my zeros" - Director of the Institute for Fiscal Studies

[@lawrencehooper4341]

Saw you on Damo's channel, Paul. And it's brought me here !

[@JA-nu2qq]

How will family businesses be valued for IHT, range of values could be massive and controversial???

[@skylineuk1485]

you forgot to discuss age 75 at the start of this < 20 mins

[@dcphillips1991]

I don't understand the point if not paying tax and tax rebates on pensions, it seems to just cause issues.

[@MrJudgementday99]

I have been an avid watcher of this channel and normally find it very informative and clears up the lies that politicians of both sides make. Today I feel that you have either deliberately or by naivety have mis-understood or formed a very biased narrative about farming. Firstly you quote figures comparing farmers affected to the general public, and deaths being only 0.1% of total deaths, surely you should be comparing deaths of farmers to people paying inheritance tax and I am certain that figure will not be 0.1%. The NFU have said this will affect 70,000 farms, which is the majority of farms in the UK, show me any other industry where the majority will need to pay inheritance tax. I suspect you won’t unless you count hedge fund managers as an industry, and even they will not pay it one way or another. You talk about emotional attachment to the land and compare it to houses in London. Again show me the percentage of home owners who have lived in the same home for 5 or more generations. I suspect there will be extremely few, whereas farming is seen as a multi generational occupation. Currently farming is massively more regulated than virtually any other industry, we can buy OSR from the continent but farmers in the UK aren’t allowed to sow the same seed. Farming is not like other industries, if it were we would have no hedges and there would be large fences keeping people out. I am sure you have watched clarkson’s farm and can see all the issues farming has had to put up with and this government is only making it worse. I hat inheritance tax, for me it is morally bankrupt, but I can accept it if our apartment in Convent Gardens has gone up by several hundred percent, but taxing farmers who have had their farm for generations and had hoped their future generations will farm the land is more than morally bankrupt.

[@third7715]

Why does the lady speak so fast, she's barely audible

[@jme_a]

You can slow the playback speed in KZbin options if you're struggling to keep up. I actually quite like it when there's somebody on that speaks faster, I don't have to increase playback when listening then :D

[@phueal]

It's ok, watching more podcasts like this will help to make you a more well-informed person and allow you to keep pace with experts.