Social care: Inheritance tax freeze expected


Health Secretary Jeremy Hunt says people must feel confident their homes are not at risk

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Thousands more people will have to pay inheritance tax to help fund long-awaited social care reforms in England, ministers will announce on Monday.

The inheritance tax threshold is to be frozen at £325,000 for individuals and £650,000 for couples for three years from 2015.

That will help to fund plans including an expected cap of £75,000 on the costs people in England have to pay for care.

Labour said that would be "a small step forward for some people".

The move on inheritance tax comes despite Chancellor George Osborne's Autumn Statement pledge, in December, to raise the threshold by 1% - to £329,000 for individuals and £658,000 for couples - in 2015/2016.

Start Quote

Just as people make provisions for their pensions in their 20s and 30s, so we also need to be a country that prepares for it social care as well”

End Quote Health Secretary Jeremy Hunt

The government is expected to announce on Monday that, from 2017, the costs of personal care for the elderly in England will be limited to £75,000.

That cap would not apply to the cost of accommodation in residential care homes which averages at about £7,000-£10,000 a year.

The plan would also let people in England with assets of up to £123,000 qualify for some state help - the current limit is £23,250.

It says its proposals could help up to 100,000 people who struggle to meet the costs of social care.

'Scandal' of care costs

Health Minister Jeremy Hunt told the BBC's Andrew Marr Show he would set out the details of the "fully-funded solution" in the Commons on Monday.

"The real point here is that we have a scandal at the moment where, every year, 30 to 40,000 people are having to sell their houses to pay for care costs," he said.

"Around 10% of us end up paying more than £100,000 in care costs."

He added: "By setting an upper limit to how much people have to pay, then it makes it possible for insurance companies to offer policies, for people to have options on their pensions, so that anything you have to pay under the cap is covered."

Start Quote

We will make sure no-one is forced to sell their home to pay for care in their lifetime”

End Quote Deputy Prime Minister Nick Clegg

He said that, "just as people make provisions for their pensions in their 20s and 30s, so we also need to be a country that prepares for it social care as well".

Mr Hunt said he would not comment on an inheritance tax freeze ahead of his Commons statement, but said: "The point of what we're doing is to protect people's inheritance - the worst thing that can happen is, at the most vulnerable point in your life, you lose the thing that you've worked hard for, that you've saved for - your own house."

Writing in the Sunday Telegraph, Deputy Prime Minister Nick Clegg said: "We will make sure no-one is forced to sell their home to pay for care in their lifetime, and no-one sees their life savings disappear just because they developed the wrong kind of illness."

Asked if it was "a firm absolute" that no-one would have to sell their house to fund their care, Mr Hunt said that was "the objective".

On Monday, Mr Hunt - who estimated the policy could cost an extra £1bn a year by the end of the decade - is expected to say it will be part-funded by previously-announced changes to National Insurance and pensions.


Paying for personal care is a problem facing millions of voters.

Grappling with a package of measures to help alleviate some of the pain has proved equally testing for ministers.

Jeremy Hunt says the coalition has costed a viable scheme which will provide more help for the less well off.

That is an element Liberal Democrats argue they have helped to secure.

But pledging to fund a £1bn bill - at a time when finances are stretched - could prove costly.

Six years ago, George Osborne promised to raise inheritance tax thresholds to £1m, a move credited with a revival in Tory fortunes.

He will be hoping his decision to freeze them now will not have the opposite effect.

'Not adequate'

Reform of social care has been the objective of successive governments and in 2010 economist Andrew Dilnot was commissioned by the coalition government to examine options for overhauling the system.

The Dilnot Commission recommended setting a lifetime cap of £35,000 on the total people would have to pay towards care at local authority prices - excluding living costs - and raising the value of assets people could hold before having to pay the full cost of their care from £23,250 to £100,000.

Labour said that, while the government's plan would help "some people who need residential care in five or more years' time", it would not be fair "for people with modest homes".

"Andrew Dilnot recommended a cap on care costs of £35,000 and warned that anything above £50,000 won't provide adequate protection for people with low incomes and low wealth," shadow minister for care and older people Liz Kendall said.

"We need a far bigger and bolder response to meet the needs of our ageing population: a genuinely integrated NHS and social care system which helps older people stay healthy and living independently in their own homes for as long as possible."

Older people's charity Age UK said it was disappointed at the "high cap" of £75,000 but added "a high cap is better than no cap at all".

Caroline Abrahams, a director at the charity, told BBC News: "Very many older people are absolutely terrified about... the catastrophic cost that care can sometimes do to you.

"The reality is people are still going to be paying quite a lot towards the cost of their care," she added.

Economist Ros Altmann said the proposals would create a fairer system that would allow people to "plan and prepare for care".

'Insurance solution'

But she added: "Even with the new system, you will have to save some money for care... at the moment there aren't any savings plans that will help you.

"[The reforms] will start to open up the possibility of the financial services sector being able to help people prepare for care.

"I don't think an insurance solution will happen very easily with this high level of cap... but I would hope that we would start to see savings products - and perhaps group insurance products, where people join together to save or insure against one or two of them needing care."

The reforms have been welcomed by the Association of British Insurers (ABI) as "another positive step forward in tackling the challenges of an ageing society".

The ABI's Stephen Gay said it was "vital that people clearly understand the cap and what costs are covered, and a national awareness campaign will be needed to make this happen".

In Scotland, personal care is free for those over the age of 65 who have been assessed by the local authority as needing it. In Wales, a weekly maximum of £50 is charged to all those using non-residential social services. Northern Ireland has a means-testing system similar to that in England.


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  • rate this

    Comment number 41.

    Stealing via immoral inheritance tax from the very people supposedly being helped! Keep your own money until you die then we steal it. This is no more than an elaborate con trick.
    Simply give all the same, or all nothing. Try being fair for a change. Means tests are unacceptable unfair, just tools of immoral politicians out to pander to voter groups for power and sinecures for themselves.

  • rate this

    Comment number 40.

    What this government is doing and getting away with is a scandal - many policies were not in their manifesto's or have gone back on what the promised - they need stopping

  • rate this

    Comment number 39.

    So we give £50M per day to the EU. We give £8.8BN in over seas aid. We all pay tax and NI and yet we cannot afford and extra £2BN so that the old (Who also paid tax an NI) can be looked after. So in short the Polish can have new roads so our old can die poor. Cameron Clegg you are both a disgrace.

  • Comment number 38.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 37.

    20 Peter Powell

    "Continued unrest"?

    I quite agree and very shortly things are going to boil over.

    Deliberate misgovernment had better watch their rears. It is clear that the plods will stand to one side, open the gates, when the angry populace arrive!

    Do not sleep easy in your beds

  • Comment number 36.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 35.

    Those in favor of a low tax economy are not living in the real world. We have historic economic and financial commitments entered into by Conservative and Labour governements. We have to meet those commitments. Reducing taxes does not do that.

  • rate this

    Comment number 34.

    Inheritance tax is just theft.

    That money has already been taxed multiple times and the government has no right to taking any more of it.

  • rate this

    Comment number 33.

    "We will make sure no-one is forced to sell their home to pay for care in their lifetime”

    Deputy Prime Minister Nick Clegg

    We will make sure that you pay for it.

  • rate this

    Comment number 32.

    The UK is not short of money;

    We have billions to spend on:

    1) Banks
    2) Overseas Aid
    3) the EU
    4) Endless wars in countries that have nothing to do with us

    But for some odd reason, when it comes to looking after the retired citizens of the UK, then suddenly we have no money at all.

  • rate this

    Comment number 31.

    The tax lawyers, accountants, and care home owners must be loving this. Sat with Tory MP's supping champers....
    And all the while the normal citizen and vulnerable are fleeced. Same old Tories, same old principle of 'profit before people'.

  • rate this

    Comment number 30.

    @21. HaveIGotThatWrong: So, can we all agree that saving is a waste of time - whether you do it or not, it will be taken from you.

    The correct thing to do is therefore to work while you are able, not worry about putting money aside to fund leeching investment bankers, and to vote for a government which gives high quality state care to everyone who is old or unable to work. Agreed?

  • rate this

    Comment number 29.

    Words cannot express the disgust I feel at the dog-eat-dog society that's been introduced by successive governments over the last 40 years... The rich are fine, while the rest of us have to fight each other for scraps.

  • rate this

    Comment number 28.

    IHT change BREAKS a firm election promise of raising the £650K to £1M.

    Politicians yet again confirm that they lie to keep their banker friends flush with cash. (also the 50% down to 45%)

    Dave just put the tax back up on the super-rich - and do it now!

    You steal our money and hope we don't notice! WE DO NOTICE and you had better give the money back or you will never see a second term.

  • rate this

    Comment number 27.

    Yet another job creation scheme for shady tax lawyers.

  • rate this

    Comment number 26.

    Hunt is misinforming and deceitful. This cap doesn't include accommodation so if you need a nursing home you'll still lose your home unless you can fund £800-1500 per week otherwise. And hey, the insurance harpies are swooping to bite you with their cons. Inheritance and Land tax (40 years ago affecting less than 1%) are now cash cows for this gov. Disgusting.

  • rate this

    Comment number 25.

    This is the future: You graduate. You spend the next few years paying off your student loan. You spend the next 40 years putting money towards your pension and (now) possible care costs.
    So if you are pleased that we have a low tax government, just remember you are still paying out; only it is called repayment or perhaps premiums. So you are not better off.

  • rate this

    Comment number 24.

    All the care home owners I've known of are very well off by most peoples standards. Perhaps councils should cap the fees they charge people at a sensible level instead of just settling any charge without question.

  • rate this

    Comment number 23.

    Renationalise everything that has been STOLEN off the taxpayers. I DONT see MY shares in Energy, Rail, Roads, Hospitals ect although you TOOK MY TAX to build this stuff then stealthily fleece it all away to your corporate buddies who you LOVE to ensure wont ever face the likes of the tripe you try and force on decent working people.

    Get this shower of braindeads out of government...

  • rate this

    Comment number 22.

    Its simple we all just move to Scotland where everything is free. It is utterly unbelievable how passive those in England are about always getting the worse deal on social welfare and simply accepting it. Every English MP should be getting swamped daily with protests and complaints about the West Lothian question and the lack of an English Parliament , that they are not is simply astonishing.


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