Chancellor Philip Hammond was able to draw on a windfall from better-than-expected tax receipts to underpin his message that austerity was “finally coming to an end” in his Budget. Upgraded forecasts for government borrowing and growth enabled the chancellor to lift public spending, which included extra funds for the NHS. He also brought forward increases to income tax thresholds, while announcing a reduction in public debt as a proportion of national income….
If you’re under 60, funding your future care might not be top of your agenda. Garden improvements, good restaurants and holidays probably rank slightly higher, as well as saving for your pension if you’ve not yet retired.
However, the government could be proposing a new ISA in order to encourage people to start saving for their later life care. Recent leaked government documents suggest that the government is considering a Care ISA as part of its forthcoming green paper on social care.
The Care ISA would have a tax free allowance of its own that reflects the cost of care. Any leftover savings from this ring-fenced amount would be safe from inheritance tax when you die.
The high cost of later life care is something that looms for many of us.
Currently, those in England and Northern Ireland who have assets of more than £23,250 will be expected to self-fund their care completely. This can mean selling the family home and spending a chunk of your savings on funding care.
Councils are becoming increasingly ruthless in cracking down on people who deliberately deprive themselves of assets by giving them away. There is no time limit on how far a council can go back when claiming deliberate deprivation.
A Care ISA would mean that, if a saver comes to need later life care, more of their assets would be protected.
However, the Care ISA has been widely criticised by both providers and financial commentators.
At the moment, people can leave £325,000 and, from April 2020, couples with children and property will be able to leave £1 million jointly. Much of the population dies with less assets than these. So, for many people, an inheritance tax break isn’t relevant, which could limit the Care ISA’s uptake, making it unattractive for providers to offer it. They may prefer to take advantage of other products, such as a pension, because they offer immediate tax relief.
Additionally, financial services firm Hargreaves Lansdown suggest that only one in four people ends up paying for long term care costs, making the Care ISA even more unattractive.
This means that providers are unlikely to see the Care ISA as a significant business opportunity. The upfront costs of implementing the niche ISA could make it unprofitable.
What’s more, it is unclear how the government would clamp down on the tax loophole that will emerge if savers pay for their care from funds outside of the Care ISA and use the ISA as an inheritance tax exempt savings fund.
The abundance of negative feedback means that the Care ISA may well remain the stuff of fantasy for the treasury.
Taking out health insurance is a big financial commitment. However, private healthcare is an attractive option to some because it allows you increased choice, private hospitals, reduced waiting times and more personalised care compared to free NHS treatment. Private treatments can be costly if you don’t have insurance.
It’s not difficult to see why Briton’s find buying a property abroad so attractive. High house prices, a temperamental climate and long working hours in the UK can make buying a property abroad seem like a highly desirable option.