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IHT reform sacrificed for £75,000 care cap

11th Feb 2013
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Heath secretary Jeremy Hunt today confirmed widespread weekend speculation that the government would abandon its election promise of a £1m inheritance tax threshold to pay for the extra costs of looking after the elderly.

Prompted by a report prepared by economist Dilnot which recommended a cap on the amount a person would have to pay for care in their old age, the health secretary bargained with the Chancellor to agree a cap of £75,000. After an individual has spent that amount on their health care, the state would step in to look after them (but not pay for the bed and breakfast costs of a care home).

From April 2017, the Department of Health explained, those with property value and savings equivalent to £100,000 in 2010/11 prices or less will get financial support. The Dilnot report recommented £100,000 was the amount recommended by Andrew Dilnot, and is equivalent to around £123,000 in 2017/18 prices.

The minister also said he hoped that insurance companies and pension schemes would step in to offer cover to help the elderly pay for their care up to the £75,000 figure.

When the state takes over, Hunt signalled that the cap - set much higher than the £25,000-50,000 Dilnot originally proposed - would be paid for by a freeze on the current IHT threshold of £325,000 until 2019. The inflation-related increases announced by the Chancellor in his Autumn Statement will be dropped.

Despite the health ministers protests, this arrangement turned his health reforms into an even bigger political bombshell as the Conservatives came into government on the back of a pledge by George Osborne in 2010 to reform inheritance tax - initially by increasing the threshold to £1m, but with a hint of more profound change to come.

IHT has long been an irritant for members of AccountingWEB on grounds of fairness and simplification.

During the later period of Gordon Brown’s Chancellorship there were numerous polls and debates on AccountingWEB calling for reform. New Labour disappointed accountants by losing its enthusiasm for reform, and the Coalition government is doing the same to try and preserve the increasingly fragile alliance.

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By User deleted
20th Feb 2013 12:22

Broken IHT promises

This video by the Taxpayers Alliance lasts 1 minute 18 seconds and if you feel strongly about the broken promise to increase the IHT threshold please pass it on.

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