Granny Tax - coming to a care home near you...

5 July 2011

a nursing home resident, yesterday

No one likes to think about getting  old. I mean, all those wrinkles and knarly fingers and wee...

However, the cost of paying for care in old age is something that is not to be sniffed at. Currently, the threshold for receiving means-tested State help is a measly £23,250, which includes the value of your home. This means that if you have assets worth over this amount, you will need to sell or loan against your home until you have less than £23,250 left, at which point the Government will help out. And you can’t even give your assets away before you get to the point of needing care- the Government will come after whichever relatives you gifted your assets to for the cash, even if it was more than seven years ago, the magic number for inheritance tax purposes.

But change may be on the horizon, as economist Andrew Dilnot has now published his government-commissioned report into funding for elderly care. The report sets out a number of proposals for changing the current system, including a £35,000 lifetime cap on individual liability for care costs (not including ‘hotel’ costs of bed and board) and raising the means-testing threshold from £23,250 to £100,000. "Anybody with assets of more than £150,000, for them the cap would be £35,000 but somebody who has a house worth only £70,000 they wouldn't pay £35,000, they would only pay £18,000, compared to the current system where they would lose almost everything." said Dilnot, defending his plans which aim to address the current dilemma faced by many elderly people of selling their home to fund care bills.

However, the main criticism of Dilnot’s plans is, unsurprisingly, to do with the cost to Government of the new proposals. Estimates of the annual cost range from between £1.7 and £2 billion, make the plans pretty expensive and may be put on the proverbial back-burner, after health secretary Andrew Lansley said it would be unfair for people to pay more tax in order to fund the older generation. After all, we are already paying their State Pensions...

But this did not deter Dilnot. His next big idea?- why not charge the elderly a Granny Tax now, so they don’t have to pay so much in future. Whether this will mean a brand new tax for the over-65s or not is conjecture, but Dilnot is focusing in on an existing tax “At the moment they don’t pay national insurance contributions, so we think that is a discussion for the next stage” he said.

Dilnot is urging ministerial discussion on his report, with draft measures drawn up for next Spring, and implementation in 2014. However, it seems the politicians are less keen, so whether anything changes at all remains to be seen.


  • SgtMunky
    Why don't we just go ahead and give EVERY single penny we earn to the government. The sooner the government stop throwing away our money, the sooner they can stop taking more than half our earnings
  • The B.
    So basically, if you've spent your entire life scrimping and saving then you'll be fleeced for everything you've got, however, if you've not worked a day in your life then you get it for free? Sounds reasonable to me, I'm off down the dole.
  • axisofevil
    "but somebody who has a house worth only £70,000..." As if.
  • mr m.
    “but somebody who has a house worth only £70,000…” no thanks to all the tossers who contributed to the housing boom cos they wanted to buy a property to rent.
  • Jeff1942
    I've hit retirment, have a wife & 2 children. I have a 500k house.. how can i ensure that my children get as much value of the house as possible (without having to downsize)?
  • Heywood J.
    Jeff, get all your kids together to buy the house from you using a joint mortgage, evenly financed by each child. Then when you get the £500K, just give it back to them in cash and you remain in their new £500k house :)
  • JimBob
    Hi Sam, your piece is inaccurate, the value of your home is disregarded if you are receiving care at home, it is only looked at if you are to move into a care home. Also Heywood, doing that is called deprivation of assets and is a criminal offence. For up to date and factual information check out the NHS website dedicated to Unpaid Carers:
  • Heywood J.
    It was said tongue in cheek of course JimBob. But he may be a perfectly healthly pensioner and this excerpt from your link doesn't help matters regarding deliberate deprivation of assets. "CRAG, paragraph 6.070 states that: The timing of the disposal should be taken into account when considering the purpose of the disposal. It would be unreasonable to decide that a resident had disposed of an asset in order to reduce his charge for accommodation when the disposal took place at a time when he was fit and healthy and could not have foreseen the need for a move to residential accommodation."
  • Timbo
    Hey Heywood! Yes get the kids to buy your house and you still live in it. Couple of the kids get divorced and guess what their spouses want their share!!! Oh dear, you've given the money back and they have to sell the house as well. Best idea keep the house you may need the proceeds later to help provide the care you want and where you want rather than where the state will stick you. Having money means choice!!!! Anyway we must all get out of the habit of expecting the poor old tax payer to fund every thing. They are there to provide for the neediest and rightly so.

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