The Conservatives are reportedly considering to reignite post-death taxes in order to deal with the growing cost of social care.
According to a Financial Times report, the party is looking at how those who are more well off can make a contribution to social care costs after they’ve passed away. The measures being considered include raising inheritance tax, among numerous other reforms.
The reported return of the tax’s consideration comes after it’s introduction was seemingly rejected by Chancellor Philip Hammond in the spring Budget.
Since this, however, senior Conservatives have reportedly stated that his dismissal of a death tax was in specific relation to a 10% social care rise on estates which Gordon Brown’s Labour government had previously proposed.
Stating that raised taxes on the wealthy would not be ruled out in the next parliament, the Chancellor indicated that the current approach may be changing, with an aim to reduce “the burden of tax on working people”.
At an approximate cost of £2billion, reports have indicated that a final care cost cap of between £80,000 and £85,000 could be included in the upcoming Tory manifesto.
Rather than indicating the exact way in which the costs will be funded, it’s likely that the manifesto will detail a review of social care, scheduled for after the election.
Commenting on the potential return to the death tax was Rachel Griffin. The tax and financial planning expert at Old Mutual Wealth highlighted that inheritance tax will often be an “easy target” when policymakers are in search increasing funding, given the public opinion attributing it only to the more well-off in society.
“In his budget, Philip Hammond reassured the public that the controversial death tax was off the table.
“However, that promise could be broken as quickly as it was made, as the Conservative Party are rumoured to be considering it as a way to fund the social care crisis.
“IHT is always an easy target for policymakers when they are looking for funding as inheritance tax has traditionally seen as something that only the ‘rich’ are subject to.”
She later referenced the difficulties that first-time buyers are facing in regards to accessing the housing ladder and the reliance that many of the younger generation are placing upon inheritance.
“Younger generations need more help than ever to find their way onto the expensive housing ladder and they are looking to their parents and grandparents to help.
“We know that lots of people that would like to pass wealth down to their families and give a financial boost to younger generations and the government should not be attacking that mentality.
Instead, she stated, that the government should look to the pension systems when exploring ways of funding social care.
“When it comes to funding social care the government should be looking outside their traditional route of IHT and consider a road less travelled.
“They could look to use the pension system and allow people to channel their funds into products such as care annuities tax-free.”
