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Govt eyes ‘death tax’ in Budget to fund long-term care

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The Government is considering changes to social care funding, including a “death tax” and a potential cap on the cost of long-term care, as part of a Budget announcement around funding for social care.

According to a Financial Times report, a committee of social care experts, reporting to Prime Minister Theresa May, has been looking at a range of options for funding elderly care in past months.

Chancellor Philip Hammond is also expected to announce hundreds of millions of pounds in emergency funding for social care in the Spring Budget on 8 March.

The FT reports that the idea of a “death tax” has been considered. Such a tax was previously proposed during former Labour Prime Minister Gordon Brown’s Government when it was suggested a 10 per cent tax could be applied to all estates as well as inheritance tax.

A cap on the cost of long-term care was also re-examined by the committee after it was shelved two years ago.

In July 2015, the Department of Health delayed plans to implement a £72,000 cap on the cost of long-term care. The cap was expected to come into force from April 2016, but was delayed until 2020.

Other proposals put before the committee include compulsory social insurance, and reforms suggested by Sir Derek Wanless when he reviewed the social care system in 2006.

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Comments

There are 17 comments at the moment, we would love to hear your opinion too.

  1. Next thing you know they will take the pennies off your eyes at the Undertakers.

  2. The elderly do need to pay for this. They’ve had it good.

    A further death tax on all estates (to stop the top few avoiding) should fund 18 year olds. Give them a chance for university fees, start a business or buy a house – something all the over 50s had free.

  3. So illogical. This seems to imply that those needing care have no assets whatsoever. I hardly think that is the case. So why aren’t these assets considered first?

    • Indeed Harry, I fail to see how or why it’s unreasonable for those that can afford to pay for care and need it having to pay for it. Otherwise we end up in the crazy situation, such as Surrey, where the Council want to whack a great gob on council tax across the board and basically make those who can’t even afford to buy a house, who are in in work benefits, help provide extra inheritance to those who are already wealthy or foot the bill for those that already own very valuable houses. The logic behind it is insane and will simply help to widen the wealth gap even further.

  4. There is a difficult balance to strike. Yes, many older people have built up reasonable estates and I would have no objection to some extra tax being used to fund care and, indirectly, help our overstretched NHS. However, there are many older people who have also worked very hard, during their lives, and, for one reason or another, have not been able to accumulate vast fortunes and would really like to see their (quite possibly struggling) children and grandchildren benefit from what they have managed to save and want to pass on. So it is not really helpful to make sweeping statements about how the elderly have had it good. I have known a few who have had it pretty rough, including some very close to home.
    It comes down to what sort of society we want to live in. Do we want to know that we will be cared for when we are not able to look after ourselves and our children can’t do it, because they all have to earn a living and live all over the country, rather than down the road? Do we want to live in a country that wants to give disabled people and the elderly the dignity they deserve and a reasonable standard of living to those who are prepared to work?

    Or do we want to live in a country with very low taxes that help the fairly well off and the extremely wealthy more than anyone else, and with private landlords buying up all the properties, thus increasing demand and prices for young people, who end up saddled with a quarter of a million pound mortgage for the rest of their lives?
    Personally I don’t think the way we run our society now gives most people a sense of any security for the future.

    • Indeed Patrick it does depend on what sort of society we wish to life in. If the second generation are so keen to cop an inheritance then why don’t they do something? Years ago the elderly lived with their kids. Anyway there are options to care. It is often cheaper to have a carer at home. However those who are so keen on Brexit will make getting a Romanian or Philippino carer harder if not impossible to come by.

    • I want to live in a society that selflessly supports those who can’t support themselves and gives everyone else the equal opportunity to make the best of life.

      I don’t want to live in a society that expects those on every level of income to support others on every level of income as that leads to some very ordinary working folk subsidising some very rich folk. That is not welfare, it is not equality and it is plain wrong. Prioritise those in need.

  5. Surely a decent solution might be a combination of these suggestions – protect a certain (increased) minimum amount of capital (say £50k?) but then apply a larger cap on costs (say £125k instead of £72k); so in all cases everyone can pass something decent on but those with greater assets have to fund a little more themselves before their capital is protected.
    And maybe in addition, as they seem to love creating new products, they could create a new “Will Care Account” (NOT a Trust though) that can be created via a will for named beneficiaries – outside the Estate for IHT, but can only then be used to pay for specific care costs (incl care annuities) by the beneficiary, or whoever they in turn then pass any intact fund onto and so on.

  6. Harry you have no evidence to support your Brexit claim and it detracts from your more pertinent point about the breakdown of the traditional family structure as a significant factor for many of the issues facing today’s society. And I didn’t realise that the EU stretched as far as the South china Sea!

  7. CDL the “we don’t want foreigners” side of Brexit seems very pertinent to Harry’s point. The government is clearly desperate to curtail immigration in the light of how the vote went and the associated rise in anti-“foreigner” sentiment. From April a minimum salary of £30,000 will be required for a non-EU migrant work permit, except for occupations on the shortage list, which hasn’t been updated since 2015 – home carers don’t appear.
    On the EU side there’s plenty of evidence. E.g. in February the Chartered Institute of Personnel and Development found 49 percent of healthcare sector employers say staff members from other European Union countries have considered leaving after last year’s Brexit vote.

  8. Back to my usual topic of protection, the big problem here is that a 10% death tax across the board is likely to make our current work arounds for making prompt payment of death benefits unworkable.

    All round, not great to see our country steadily worsening treatment of the most vulnerable – who may not include you or me today, but almost certainly will do in some guise or another one day.

  9. Ruth be assured that I am chronologically disadvantaged (!) and I know that there is a strong chance that I will be let down by the NHS and social services at some point and this is due to successive governments not having the bravery to address these issues sooner (because they want to get re-elected! But an advantage of having been around so long is that you get to realise that any politician’s public position is invariably different to their private one. We have a tendency in the UK and elsewhere, probably driven by all the ‘noise’ from the internet, social media etc to only take notice of the loudest or most extreme views. So much opinion is printed as fact or scaremongering – words like might, could, and your ‘considered’ do not mean it will happen as we live in a universe of grey – not one that is black and white – so I think the word ‘desperate’ is unnecessarily emotive or do you believe that the principle of totally unfettered movement of people from and to anywhere in the world should never be diluted regardless of the consequences? PS my newest member of staff is Polish and an absolute gem.

    • Hey CDL. If you have been around long enough (as have I) than as a good financial adviser you have no doubt done what you have advised your clients to do. And I also refer to the somewhat optimistic findings of how much advisers appear to earn.

      This leads to the question – why do you have to rely on the NHS or social services? Don’t you have PMI and sufficient funds to avoid being a burden on social services?

      There doesn’t appear to be much of an ethos of self help in the 21st Century.

  10. I agree with you Harry, the sense of entitlement is this country rather than self-help is both frustrating and disappointing. I also appreciate the irony in your reference to the attention-grabbing headlines regarding our supposed earnings – which confirms my point about all the internet noise bombarding us. The point about the NHS and social services is not about the ability to pay if required it is about being able to be seen for acute/emergency/A & E issues in a timely fashion rather than being left in a corridor for hours or on the ambulance. And even if willing to pay, we are faced with obstacles to secure the appropriate social care packages including access to the professionals who co-ordinate them and I am painfully aware of the late-evening discharges from hospitals of vulnerable elderly patients. If I cannot stay at home, private nursing home/sheltered accommodation is not keeping pace with need. An ageing population has been a ticking time-bomb for decades and we are grossly underprepared for it as a country and the consequences affect us all even those of us who can and do pay for all our care, we are not ‘islands’!

  11. The world is changing. We cannot forever milk the cow at both ends. I’ve always understood the need for Government to seek financial contribution for the elderly to pay for care – it’s the maths – but I’ve always struggled with the notion. At my age whilst working I could suffer a grave accident and lean heavily on the full support of the NHS. From the scene of the accident through to intensive care – all free. But somehow when I move into my life’s winter, I have to pay. It sends a strange message and perhaps is reflective of an underlying disregard for the elderly. Let’s face it – the elderly are other people – we can speak of them in the third person almost oblivious that we will join their club – all being well. I’ve even wondered if it’s legal to discriminate in that way. I’m no lawyer. Better brains than mine would have quandered that, no doubt. So now we look at a flat rate death tax. It’s all a bit simplistic and could possibly give rise to a boom in gifting and equity release so as to die in debt. Who know.

    Fundamentally though – after a gentle meander through stuff – I’m a cynic. I never believe in Government motivation as has been mentioned in earlier posts, that looks longer down the road than 5 years.

    This issue – ageing population and all of its related fiscal consequences will not go away. The development of digital tax reporting will grow at a pace. The Big Brother will in all probability, within half a generation, know everything about all of our money. Income, assets, loans, et al. Having all that data is super useful if you ever want to undertake straightforward “means testing” for state pension. It’s the immediate cure! Watch this space for a brave politician. Outrage would be biblical in its dimension. “I’ve paid in” will echo around the land – “what about all my national insurance”. The simple answer to that is surely, “yes you paid insurance, for medical care etc and now look, we can see how fortunate you are from your digital records, and you simply don’t need to claim on your insurance”

    Maybe this will sound absurd. Maybe it will resonate. Either way change is coming and it is not going to be good!

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