Quandary over a care home
Q We recently sold my mother’s house following the death of my father and need to place her into a care home, and the monthly fees are not inconsiderable. It’s likely that her income for the current tax year (ie, from interest on fixed rate bonds) will exceed the personal allowance.
In my role as her Power of Attorney, am I obliged to complete a self-assessment? Are there any limits on the age that Income Tax is payable? Are there any methods available to offset against care home costs?
A There are no age limits for Income Tax, so if your mother has untaxed income, such as bank interest over £10,000, then you will need to submit a self-assessment tax return for her.
Remember, in addition to the £12,570 Personal Allowance, there is also the starting rate for savings (£5,000) for individuals with non-savings income below £17,570, and the Personal Savings Allowance (£1,000 for Basic Rate Tax payers), so she could have tax-free income of up to £18,570.
As for offsetting care costs, you will need to ask the local authority for a care needs assessment. Depending on the outcome of this, your mother may be entitled to personal care and/or nursing care payments of £248.70 and £111.90 per week respectively*. These payments could contribute up to £360.60 per week towards care home fees.
Q I recently started a new job and have joined a workplace pension scheme. Is this likely to be worthwhile and should I transfer my previous workplace pension to my new one?
A One of the main benefits of a workplace pension is that your employer contributes to this on your behalf. If you opt out, you’ll miss out on these valuable contributions which could otherwise significantly increase the value of your pension at retirement.
Pensions are a long-term investment so the earlier you can start, and the more you can contribute, the better the potential for growth. Obviously everybody’s individual circumstances are different, but being a member of your workplace pension scheme is likely to be worthwhile for most.
A couple other things to think about. If your employer offers a “salary sacrifice” and gives you any of the NI savings that result, this could further boost your pension fund, so it’s worth asking about this.
Your workplace pension will have a “default fund” that your pension contributions will be invested in. Find out what this is and think about whether it’s right for you. The pension provider will likely have a range of investment options available and can explain these to you.
* Source: www.careinfoscotland.scot/topics/care-homes/paying-care-home-fees/personal-and-nursing-care-in-care-home
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