HUNDREDS more Scots are likely to be hit with inheritance tax to pay for an extension in state support for elderly care in England.
The coalition is today expected to announce a three-year extension of the freeze in the inheritance tax threshold in a move that could affect 5,000 people across the UK.
Anybody bequeathed more than £325,000 – or £650,000 for couples – has to pay 40 per cent tax on anything over those levels. The thresholds have not been raised since April 2009, despite inflation.
The move to extend the freeze to 2018 is intended to cover the £1 billion cost of introducing a cap on the total amount anybody has to pay on social care.
The UK government hopes that the revenue can help fund a similar free care package for the elderly as that which exists in Scotland for those who need care at home or in special homes without forcing them to sell their property to fund it.
However, the plan to raise money for the scheme will affect people in all parts of the UK through inheritance tax. The expected £75,000 cap is more than twice as high as the £35,000 limit suggested by the independent Dilnot Commission appointed by Prime Minister David Cameron to make recommendations on the highly fraught issue.
Alongside the cap, Health Secretary Jeremy Hunt is to announce a large rise in the assets threshold beneath which people receive means-tested support meeting care bills. Currently £23,250, that is set to rise to £123,000.
Mr Hunt said: “The point of what we are doing is to protect people’s inheritance. The worst thing that can happen is at the most vulnerable moment in your life you lose the thing you worked hard for, that you saved for, your own house.
“And what we are trying to do is to be one of the first countries in the world which creates a system where people don’t have to sell their own house.” He said the current situation was a “scandal”.
“Every year, 40,000 people are having to sell their houses to pay for their care costs. About 10 per cent of us end up paying more than £100,000 in care costs.”
Mr Hunt said it would be a “fully funded solution”, adding: “Finances are very, very much constrained at the moment and the fact that we are finding what might be as much as £1bn a year to do this shows that we want to help those hard-working people who have saved all their life and suddenly quite randomly find that their house is at risk.”
The Association of British Insurers (ABI) said the reforms were a potential “step forward”.
Stephen Burke, director of United for All Ages which has been calling for a lower cap, said the £75,000 cap was “the dampest of damp squibs”.
“It is a con of the worst sorts. There are fairer and better alternatives. The government, for example, could have raised the capital threshold for paying for care to £200,000 or higher.”
The National Pensioners Convention general secretary Dot Gibson said: “These proposals simply tinker at the edges.”