"Exempt everything except the family home from CAT"

[Brendan Burgess]

This interesting suggestion was made by Merryn Somerset Webb in the FT as a way of dealing with the housing crisis in the UK.

She proposes a tax of 20% on inheritances of the family home.

The idea is that it will encourage people to downsize.

If you sell your family home and buy shares and leave those shares to your children, they will pay no tax.

If you leave the family home to them, they will pay 20% tax.

Brendan

 

[odyssey06]

A little confused... you sell your family home and then rent?
The share exemption is maxxed out at the sale value of the home?
Presumably if you buy a smaller property and try to leave that it would be taxed at 20%?

 

[Brendan Burgess]

Hi Odyssey

Here is a link to the full article.

https://www.ft.com/content/811463be-af4b-11e7-aab9-abaa44b1e130?mhq5j=e7

The property piece is the last few paragraphs:


Finally, a word on the UK property market. I have, like all other commentators, been thinking again about a possible solution to its various problems (beyond the obvious one of raising interest rates to crash prices). And I think I might have a partial solution. It involves inheritance tax. David Cameron introduced an add-on to the tax regime called the main residence nil-rate band, which by 2020 will allow a couple an extra £350,000 tax-free allowance to use to pass on a family home. This is a bit silly. It perpetuates and legitimises the deeply destructive idea that homes are the be all and end all and it discriminates against those who don’t own them.

How about if we reverse it and then drop IHT on all assets apart from residential property? So all investments in everything else — equities, bonds, family firms, gold bullion and so on — pass on tax free. But all houses are taxed on death at, say, 20 per cent of their market value or perhaps even just on their capital gains (no allowances).

That should encourage the retired to downsize — possibly even freeing up the cash to pay for their own social care along the way. And it might even mark a turning point in the way we view houses, from a must-hoard item to an end-of-life hot potato. Problem solved. Comments welcome.

 

[T McGibney]

All suggestions emanating from the UK in relation to inheritance tax policy need to be viewed in the light that they don't have any form of gift tax, and wealth can freely be transferred tax-free across generations by way of gift.

 

[Gordon Gekko]

All suggestions emanating from the UK in relation to inheritance tax policy need to be viewed in the light that they don't have any form of gift tax, and wealth can freely be transferred tax-free across generations by way of gift.

And also through the prism of ISAs, the ability to realise a meaningful level of capital gains each year (>£10k), etc