Out of interest - what is physical wealth? Is it the value of the 'stuff' you own. Because it seems quite high for all deciles if it is, and it's not financial wealth as that is separate. I guess if I add up the cost of replacing everything we own we could get to quite a high figure...yes I know that my contents and car insurance will tell me.
Of course I can’t simply add in my pension pot since if I decided to pull it ALL down today, most of it would be taxed at 40% - it’s post tax value is under 60% of its current value.
No, I'm just waiting for that premium bond prize.It's that sort of attitude that prevents you from becoming a millionaire.
Agreed…though I was thinking about what I’d be worth if I realised all my assets today…including the totality of my pension pot. And it’s by doing it in one fell swoop that much of my pot would be taxed at 40% since I’m in receipt of state pension and I’ve got a good bit more than ~£40k in the pot. In fact I’d only need ~£112k in my pot for me to go crashing into the 45% rate. Not something I have any plans to do I should add.
…and exactly why I have few qualms about unused/residual pension fund being subject to IHT once me and the mrs have flown to another place. The fund was built with untaxed money. I am accepting that the fund should be taxed at some point…and if that is through IHT for a residual fund then so be it.
www.telegraph.co.uk
That’s useful thankyou…my only obvious observation being that the three children have a £2.1m house they can sell and split the proceeds from - so £700,000 each. The IHT bill split three ways us £290,000 each - so each child will inherit £410,000 from the property alone. Not bad given the parental outlay for the property might have been at a very rough guess something in the region of £100,000-150,000. Add in £133,333 each get share of £400,000. £540,000 each - not bad inheritance.and of all the changes that were looked at in the budget, taxing the pension through IHT is one i can accept (albeit it will have big personal impacts), although i am much more a low-tax advocate - and indeed would love to massively simplify IHT, remove lots of excemptions/ trust planning etc but increase the limit to circa 1.5m, so it catches all of the richer estates but leaves the rest largely alone and is probably more in line with what this used to be 30 years ago. And a better proposal would be to follow most of Europe and not tax the estate but tax the people who inherit - see article from the Telegraph - extract below for those that cannot access it
Labour has lessons to learn from Germany on inheritance tax
Britain may be further down the collectivist route than some of our Continental neighbours
Now let’s compare Germany and its reassuring social democratic model.
Take a divorcee, whose modest house in London’s Putney bought 30 years ago is now worth £2.1m, has savings of £400,000, and leaves her estate equally between her three children.
On her death, the only part of her £2.5m estate that will be exempt from inheritance tax will be the first £325,000.
Unlike still married couples, the allowance of her ex-husband who predeceased her cannot be applied to her assets – the UK has a hefty tax on marriage breakdown.
She also misses out on the additional £175,000 exemption on her home, as for estates over £2m, this is reduced by £1 for every £2 over that threshold. It has disappeared to nothing when assets reach £2.35m.
So without fancy tax planning, the children of our imaginary middle-class Putneyite will be landed with a tax bill of £870,000 – 40pc of everything above the initial £325,000.
Now let’s look at her Munich equivalent, also with three children, and an estate of roughly equal value. The Germans, along with virtually all of Europe, don’t tax the estate but rather the individual legacy.
The first €400,000 each child inherits will be tax-free, and then they will each pay 15pc tax on the remaining €600,000. Without employing any wheezes, the combined tax on our Bavarian divorcee’s estate will be €270,000 or roughly £225,000 – not much more than a quarter of what would be due in London.
The German death tax rates on a son or daughter max out at 30pc – and this is for individual bequests of over €26m (over £21.5m). The Teutonic rates can hit 50pc, but that is if someone chooses to leave over €13m (£10.8m) to an unrelated random punter – and surely few are quite that lucky.
Perhaps it’s time for Ms Reeves to take a trip to Germany and learn something useful from a country she would like to emulate.
Guess that's what happens when you have "quantitative easing" which just means printers go bbrrrrr.
Sunday Times Rich List UK is always interesting reading each year.
