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Inheritance Tax frozen to fund care bills

John Fitzsimons
by Lovemoney Staff John Fitzsimons on 11 February 2013  |  Comments 12 comments

Inheritance Tax threshold frozen until 2019 to help fund Government's £75,000 cap on care home bills.

Inheritance Tax frozen to fund care bills

The Government is set to announce that the Inheritance Tax threshold will be frozen until 2019 to fund a cap on care home bills.

The Government wants to install a cap of £75,000 on the costs elderly people have to pay for care. After that point is reached, the State will cover the rest of the bill.

Inheritance Tax is currently payable on estates worth at least £325,000. While this once applied to only the wealthiest, house price inflation has meant that increasing numbers of people have been hit with the 40% tax levy on every penny above that threshold.

The Conservatives had previously pledged to raise that threshold to £1 million, and this measure has already led to grumbling from backbench MPs.

Government sources have suggested that as many as 100,000 people who would have had to pay for their care will be helped. There has been growing unrest at the number of older people forced to sell their home just to cover the costs of social care – as many as 40,000 a year according to figures from the Government.

That said, it’s worth noting that the £75,000 cap is double the figure recommended by the Dilnot report into social care.

Critics have suggested that the figure is too high to get people engaged with the idea of saving to cover any future care costs, though the Government hopes that insurance companies will step in and start offering policies which will reduce the impact further.

What do you think? Is the Government right to freeze Inheritance Tax to pay for a social care bill cap? Has it set the cap too high? Have you set money aside in case you need to pay for care? Let us know your thoughts in the Comments box below.

More on social care and Inheritance Tax

How to prepare for your care in retirement

Eight ways to pay for social care

Social care: thousands of pensioners lose home due to poor procedures

Ministers: elderly should downsize and save for care

How to cut your Inheritance Tax bill

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Comments (12)

  • chrispies
    Love rating 0
    chrispies said

    Does this incentivise people to save and penalise those people who do, but reward those who dont with the hard earned money of those who do!? You are taxed heavily if you earn within the 40% bracket, if your pension is the same too, on your savings and investments and also when you move on. Therefore as Winston once said in as many words, the many owe so much to so few.

    Report on 11 February 2013  |  Love thisLove  0 loves
  • petethepill
    Love rating 1
    petethepill said

    The Conservative's promised before the election that they would increase the I H T threshold to £1M

    Thus was reiterated recently by Osbourne ( he would increase the present level within 2 years)

    How can anyone believe in, and vote for, a party who clearly have severe issues with the truth?.

    Report on 11 February 2013  |  Love thisLove  1 love
  • chrispies
    Love rating 0
    chrispies said

    I think the government should switch from heavily taxing the shrinking cash pile and get this country exporting again like China to reverse our long term trade deficit (aka country credit card bill) and create jobs in the technology, engineering, manufacturing, creative and building-civils industries, the real cash generative sectors that pay the bankers and finance and legal eagles wages and other service sectors, much as it did during the industrial revolution in the 1700 and 1800s... Back to the Future

    Report on 11 February 2013  |  Love thisLove  0 loves
  • russbiker
    Love rating 70
    russbiker said

    @petethepill: if you're waiting to vote for a party that doesn't "have severe issues with the truth", you'll be hanging onto your vote for a very long time.

    Report on 11 February 2013  |  Love thisLove  0 loves
  • amwell44
    Love rating 77
    amwell44 said

    Petethepill you are confusing truth with aspiration. Personally, I believe George Osborne means what he says, but governments can only do what can be financed at any given time. Do you seriously believe either Labour or the Libdems would do anything to relieve IHT ? Not likely. I've been on the receiving end of IHT and I hope to live to see it abolished, or at least the threshold raised to £1M - by a Conservative government.

    Chrispies, low taxes to boost entrepreneurial activity and personal spending is another great aspiration, but governments do not create jobs and our manufacturing sector must compete with the likes of China, and India, who will win on costs. That is why our great industries declined. We can only compete in the future with very high tech products at the cutting edge and a highly educated workforce (Well done Mr Gove, you've got the right idea).

    If I sound like a Conservative, I am.

    Report on 11 February 2013  |  Love thisLove  0 loves
  • Ripped off
    Love rating 17
    Ripped off said

    Pre the 2010 election, I actually got an email from Cameron promising the starting line for Inheritance tax ( real name grave robbing ) would be increased if and once he got power. But as reality has proved, like every other promise this posh spive and his cohorts made pre-election, that promise like the others was forgotten and brushed under the carpet.

    Now if the above was not bad enough, we are being told the low starting point for this government led harassment thats starts before the bloods cold after death is to be frozen until at least 2019.

    I personally would rather burn my home, with all my already tax paid assets in it, to the ground than leave it for Cameron's Gestapo ( HMRC ) to hoist another 40% in tax out of with their hiked & fictional valuations in hand.

    Lets hope UKIP find this death tax racket the next injustice to get their teeth into and forces Cameron to do yet another U Turn.

    Make Cameron for once keep one of his pre-election promises or vote him out.

    Report on 11 February 2013  |  Love thisLove  1 love
  • GIVESUP
    Love rating 0
    GIVESUP said

    The year book for 1946 shows 39% death duty due on estates valued between £300,000 & £400,000.

    The average house price was then c£500 and average wage (annual) c£381

    Just too easy and tempting for politicians - steal from the thrifty - call them the rich and tell the young that the elderly deserve it because life was easy for them.

    No good just moaning on web sites. Bombard your MPs and sign petition http://epetitions.direct.gov.uk/petitions/31778 - . Not about inheritance tax but the freezing of the tax free allowance for the over 65s so that the differential (which was actually introduced in 1925 by Churchill) will be eroded and with every (meagre) pension rise we will pay more tax..

    Report on 11 February 2013  |  Love thisLove  0 loves
  • amwell44
    Love rating 77
    amwell44 said

    Death Duties applied to all deceased Estates in the 1940's, I happen to know and IHT is just another name for it. Only the Conservatives have said they are in favour of change. What we have is a COALITION, not a Conservative government.

    If you vote UKIP, you will get Labour. Don't waste your vote on a Party that will never form a government.

    Report on 12 February 2013  |  Love thisLove  0 loves
  • electricblue
    Love rating 769
    electricblue said

    Of course the UK can compete with Chinese manufacturing. We just concentrate our energies on more sophisticated stuff than the items you see in the pound shops. When you take into account shipping and logistics plus the high order values and inflexibility of Chinese suppliers (and the fact that they will supply you for years with a product then suddenly shaft you with a different specification), most customers will pay a premium of 25% or more for a product not made in China. What we do need is compulsory country of origin marking on all goods sold in the UK so that customers can make informed choices. It may be in the small print, but by law it doesn't have to be. Totally absurd.

    Report on 12 February 2013  |  Love thisLove  0 loves
  • yocoxy
    Love rating 152
    yocoxy said

    @petethepill. So who are you going to vote for? One of the other parties that you believe would raise the IHT threshold?

    This is another example of the shared burden of reducing the deficit which will be conveniently overlooked when the loudmouths start shouting about it all being an "attack on the poor"..

    Report on 13 February 2013  |  Love thisLove  0 loves
  • amwell44
    Love rating 77
    amwell44 said

    Electricblue, if what you say about China and Chinese goods is true, how come they have a growth rate of about 7%, whilst we are struggling to achieve 0.5%?

    I'm old enough to remember when Japanese goods were considered trashy and their cars were a joke. Look at them now.

    Back on topic, it's the Libdems in the Coalition who won't allow the IHT threshhold to be raised. Vote in a Conservative government and you will see it happen. Neither of the other Parties will do it, especially Labour, who are passionately for high taxation and against inherited wealth.

    Report on 15 February 2013  |  Love thisLove  0 loves
  • laplennerie
    Love rating 20
    laplennerie said

    Get rid of your wealth before you die. It has always been the case of savers in the UK - if you save you get punished. The money rasied from this will dissapear into that great black hole managed by Westminster Gas works.

    Report on 17 February 2013  |  Love thisLove  0 loves

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