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Death and taxes

March 12, 2013

You may remember my wish list of ten tax changes I’d like to see this year.  I had an exchange on twitter immediately afterwards where a fellow tweeter wrote:

@taxbod Maybe that’s item 11: a wish that people would stop panicking about death duties. If you’re rich enough for them to hit, be glad?

So let’s think about that for a bit, shall we?

First thing to remember about inheritance tax: you never pay it.  Think about it.  You’ll be dead.  You’ll never pay a penny.  The money comes out of your estate, but you’ll be dead, so why do you care?

Controversial?  Yes, I know, I’m a single, child-free, middle aged woman so I don’t understand what it is to have children and to want to leave my wealth cascading down the generations.  My children are only theoretical, and I’d like my theoretical children to get on with their lives without waiting for me to die and leave them a house, actually, but, again, I accept these are only theoretical children so what do I know?

So let’s look at what would actually happen to my putative estate and my theoretical children.  They’d get my house and the money in my bank accounts and my collection of first edition Lois McMaster Bujolds and what would it amount to?

Well, would it amount to more than £325,000?  The Land Registry says that the average house price is around £162k although the BBC makes it 100k more.  So your house is safe, unless you have something amazing or you live in London.  And if you have enough dosh in the bank to take you over the limit, well, you’ll have to pay inheritance tax out of it.  You might have to sell my collection of first editions to pay it, even; but I’m sorry I still find it hard to get excised over the possibility.

Oh, and by the way my putative children might also have a theoretical father in situ, don’t you think? Well the good news is that the inheritance tax limit is transferable so effectively we’d each be able to leave the theoretical kids up to £325,000.

Why on earth should some people start out in life with £650k when others start with nothing?  (Remember one of the first things the coalition did was abolish Gordon Brown’s Child Trust Fund which would have given every child a paltry £250 capital sum to start them off saving)

So forgive me if I can’t get too excited about death and taxes.  I’ll be dead, and when I am you’re welcome to a chunk of what I leave behind.  And if you’re lucky enough to have more than £325k when you pop off, I hope you won’t begrudge the same.  Because, you know, we really ARE all in this together, actually.

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