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Freezing inheritance tax thresholds will help fund social care for the elderly Freezing inheritance tax thresholds will help fund social care for the elderly
(7 months later)
Thousands more people will pay inheritance tax to fund a watered-down version of the Dilnot plan for universal state funding for elderly and social care, the government is expected to announce on Monday.Thousands more people will pay inheritance tax to fund a watered-down version of the Dilnot plan for universal state funding for elderly and social care, the government is expected to announce on Monday.
Pensioners and disabled adults will have to pay up to £75,000 of any care bills they incur before the state steps in under the new arrangement. There will also be an increase in the means-test threshold, so that anyone with assets under £123,000 will automatically receive free care. Currently, if someone needs residential care and has more than £23,250 in savings, capital or assets, they must pay for their care in full. Controversially, however, the coalition is paying for the change by maintaining a freeze on the inheritance tax threshold for another three years.Pensioners and disabled adults will have to pay up to £75,000 of any care bills they incur before the state steps in under the new arrangement. There will also be an increase in the means-test threshold, so that anyone with assets under £123,000 will automatically receive free care. Currently, if someone needs residential care and has more than £23,250 in savings, capital or assets, they must pay for their care in full. Controversially, however, the coalition is paying for the change by maintaining a freeze on the inheritance tax threshold for another three years.
Alistair Darling first froze the inheritance tax threshold in the last year of the Labour government to 2014. Now the coalition is to announce it will stay at £325,000 – or £650,000 for a couple – until at least 2018, bringing many more people into the tax. Until 2010 the threshold had traditionally risen in line with inflation, which is currently 2.7%.Alistair Darling first froze the inheritance tax threshold in the last year of the Labour government to 2014. Now the coalition is to announce it will stay at £325,000 – or £650,000 for a couple – until at least 2018, bringing many more people into the tax. Until 2010 the threshold had traditionally risen in line with inflation, which is currently 2.7%.
It is likely to prove an unpopular move in middle England, where the rise in house prices over the past decade has left hundreds of thousands of people facing large bills. George Osborne's decision means anyone bequeathing more than £350,000 will pay an extra £10,000 in death taxes, as inheritance tax takes 40% tax of anything over the threshold. Last night Christian Guy, director at the Centre for Social Justice thinktank formed by Iain Duncan Smith, said the move was "the wrong priority".It is likely to prove an unpopular move in middle England, where the rise in house prices over the past decade has left hundreds of thousands of people facing large bills. George Osborne's decision means anyone bequeathing more than £350,000 will pay an extra £10,000 in death taxes, as inheritance tax takes 40% tax of anything over the threshold. Last night Christian Guy, director at the Centre for Social Justice thinktank formed by Iain Duncan Smith, said the move was "the wrong priority".
Ministers believe it is the right thing to do as the lack of funding for social care has forced 20,000 people a year to sell their homes to pay for care.Ministers believe it is the right thing to do as the lack of funding for social care has forced 20,000 people a year to sell their homes to pay for care.
Andrew Dilnot, former director of the Institute for Fiscal Studies, was asked by the government in its first year to examine the issue. The Observer revealed in 2011 that he would recommend people be forced to pay only up to £35,000 for their care before the state met the costs. He also suggested that the means test threshold should be set at £100,000, describing his report as a "once-in-a-lifetime chance" to fix a system which cannot cope with an ever growing number of old people. However, Dilnot's proposals would have cost £1.7bn a year and were regarded as too expensive by the Treasury. The coalition has since been debating how to find a solution.Andrew Dilnot, former director of the Institute for Fiscal Studies, was asked by the government in its first year to examine the issue. The Observer revealed in 2011 that he would recommend people be forced to pay only up to £35,000 for their care before the state met the costs. He also suggested that the means test threshold should be set at £100,000, describing his report as a "once-in-a-lifetime chance" to fix a system which cannot cope with an ever growing number of old people. However, Dilnot's proposals would have cost £1.7bn a year and were regarded as too expensive by the Treasury. The coalition has since been debating how to find a solution.
Under the new system, an extra 100,000 people who would not now receive support are expected to benefit. It is understood the government will also announce that from April 2015 no-one will have to sell their home in their lifetime to pay for residential care, with those unable to afford the fees given the right to defer paying until their death.Under the new system, an extra 100,000 people who would not now receive support are expected to benefit. It is understood the government will also announce that from April 2015 no-one will have to sell their home in their lifetime to pay for residential care, with those unable to afford the fees given the right to defer paying until their death.
There will also be free care given to those who turn 18 with eligible care needs and a lower cap for people of working age who develop care needs before retirement age.There will also be free care given to those who turn 18 with eligible care needs and a lower cap for people of working age who develop care needs before retirement age.
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