Potentially, another national insurance tax increase to pay for social care

[Toodaloo1567]

Just stumbled on this and wondered about everyone’s thoughts. Essentially, the government is being advised to increase national insurance to pay for elderly social care. I’m not keen. apple.news/AQkrJ_mvnRmClZjz_HJzA9w

It's because of the 40% rate - if it was tiered, it wouldn't be as attractive for people to try to avoid it. Going from zero on the first £350/£500/£1m then 40% on the rest just encourage "planning" to bring the estate back below the threshold to avoid the 40%. If it was 10% or 20%, at lower tiers, it wouldn't be worth the effort and cost for people to avoid relatively small amounts of tax.

The answer is to start IHT at lower levels, but have lower tiers of tax according to estate value, and there won't be the same "desperation" to avoid a whopping 40%/ It really is ALL about human behaviour - it always is, yet the politicians and civil servants just can't see it.

That isn’t why it’s bonkers - I can’t possibly get exercised about a tax that’s paid after I’m dead. I won’t care then and I don’t care now. There would be absolute outcry if more people were brought into its remit.

Presumably you don't care because your estate isn't worth enough to have to pay IHT.

Never presume. You’re wrong.

Most of us with DC are bothered though. When people have been successful financially and have assets they usually want to see dc provided for. If no Dc I guess IHT planning isn’t important. Or DC are very well off and don’t care about tax. The majority of families do care though and it’s now in sharp focus as housing is so expensive. When we bought our first house we got tax relief on the mortgage. Now it’s much harder to buy without help.

Therefore, tax planning and giving early is a better route for many. Most people don’t want extensive assets and see DC struggling to buy a home. I agree with @Badbadbunny It’s also the cliff edge of 40%. It was always a tax that didn’t affect ordinary folk but now it could.

A lot of elderly in the care system dont have any money to buy a product at retirement that is likely to hundreds of thousands.

That’s disgusting,@Sansan18 I am so sorry for your DM and everyone in her position. If we live long enough and the problem isn’t solved, many of us will be in line for the same treatment.

And I agree that blaming the staff on the floor is not likely to be the main answer, @Oldenpeculiar , although we have certainly seen examples of maltreatment by staff in the media over the years. At the fees quoted by @Sansan18 , staff ought to be paid properly but I bet they are not.

My parents are in a highly regulated retirement home. Having paid a flat fee of about €850K for a (very nice) flat they now pay €7500 for the lowest level of care - basically the gym and pool, lots of activities, transport to medical appts around town, weekly cleaning, a good main meal and all utilities. The memory unit costs €11K pp per month but the care has an excellent reputation.

The place has a charitable arm so that these fees help to support some of the residents. It is nonprofit but that is possibly a subtle term.

The €850K is largely refundable.

The main thing is that my parents are relatively happy and certainly well cared for in this environment. But …. wow.

I honestly have no idea what it should cost to provide an acceptable quality of care. Do you?

We have kids - four of them. Quite honestly if a tax free windfall of £250k, plus 60% of anything over that isn’t enough for them we’ve gone badly wrong with our parenting. We’ve already helped with house purchase, three of ours own homes and the fourth sees home ownership as a tie they don’t want.

Edit: My parents pay €7500 monthly for the lowest level of care.

Can I point out that only about 5% of estates pay IHT (I would be in the 5%) and the average age to inherit in the UK is 61.
My suggestion would be that an additional death tax is applied first to everyone, regardless of size of estate, who dies over state retirement age. This tax would cover the cost of social care and be applied whether you needed care or not.

Then people would just give their money away sooner, ie before state retirement age. I’d rather stay with the lottery. If I pay for my own care I can choose it rather than be stuck with the standard the state seems appropriate.

@Kendodd I said earlier hardly anyone paid it! That was the point of discussing a tax for all estates. In addition there’s a debate about whether this would raise enough. @poetryandwine thought not. So we need a very long term plan but it’s very difficult to get the money quickly. We have an immediate problem and it’s getting a lot worse!

And I agree that blaming the staff on the floor is not likely to be the main answer, , although we have certainly seen examples of maltreatment by staff in the media over the years. At the fees quoted by , staff ought to be paid properly but I bet they are not.

It's not just about the pay though, it's about having enough of the right people, trained properly and the right - working - equipment and resources.
Yes there's examples of maltreatment, but how many of those are by people who are just awful people doing it for kicks as opposed to not cut out for the job, poorly trained with little to no supervision, where both training and supervision could have picked up the subtle hints that this person is not the right one for the job? Were they just plugging a hole in a rota? Were blind eyes turned because there was literally no one else to deliver the care? Is any of that even looked at?
No, it's not. And that's system failure, that's ignored while the individual is highlighted. Don't get me wrong, anyone engaging in any type of abuse should be highlighted, of course they should, however the systems that allow them to be there, and continue unchallenged are as much of a problem - but dealing with that eats into profit, and doesn't appeal to the public in the same way as one individual perpetrating abuse does, so it gets ignored.
Training and supervision costs money, enough staff costs money, decent food costs money. Which means less profit.

It's in part a societal issue - I now work in the leisure industry, at the same level, with the same qualifications, and I get paid more. Simply, people are willing to pay more for their leisure than they are for their vulnerable relatives to be cared for properly.

I don’t doubt you on this. Proper pay, proper training, proper respect. Pay is often a proxy.

I did a little bit of very, very rough maths.
Mean total wealth for individuals in Great Britain was estimated to be £305,000 between April 2018 and March 2020.
There were 666,659 deaths in the UK in 2021, lets say 650,000 were pensioners.
A 5% death tax is £9.9bn
A 10% death tax is £19.8bn

The last year for which there is confirmed spending data on social care is the financial year 2022/23, when net expenditure on adult social care was £22.9bn.
So about a 12% death tax and you've got it all covered.
You're welcome.

Oh, and this way it would largely keep pace with the baby boomer hump coming.

To the poster who said earlier that it would be a fault of parenting if DC didn’t have houses - I’m gobsmacked. It’s incredibly difficult for many to save up and then afford a big enough mortgage. It’s nothing to do with what parenting skills you have. What about some SEN DC? Or the ones working in care homes? Of course parents should help although £1/4m doesn’t go far between several DC and will hardly touch the problem in and around London without DC having a very good job. Obviously dc living in a cheap area with a decent job will be ok. It really has become more difficult and it’s not about parenting!

You’ve misread what I said. Try again:

We have kids - four of them. Quite honestly if a tax free windfall of £250k, plus 60% of anything over that isn’t enough for them we’ve gone badly wrong with our parenting. We’ve already helped with house purchase, three of ours own homes and the fourth sees home ownership as a tie they don’t want.

I’ll put it more simply. Our kids will get a quarter of a million each tax free (care home fees permitting). If that isn’t enough for them our parenting is fucked.

I wrote earlier that I support your idea of a broadly applied IHT, but I think this is an optimistic model based on my very cursory searches and guesses.

Is this mean individual wealth or the mean estate at death? ONS says wealth decreases steadily after age 64, and the mean is likely to be significantly higher than the median.

The wealthy pensioners are mostly already paying IHT and someone said that’s only 5% of estates above £325K pp or £650K per couple. So what are the true mean and median? The 5% statistic, which I have frequently heard, suggests a much lower figure.

If we suppose the mean pensioner estate is £250K pp, which still seems high in this light, 5% is just £12,500. Excepting those who pay normal IHT and ignoring the issue of bandings, this brings in around £7B, and I don’t think it is politically palatable: it is Theresa May’s Death Tax.

To make the concept politically viable I think you need very, very low bandings and then the revenue is minimal.

I would like to be wrong - I would like for everyone to accept that we need to pay a social care tax/insurance either annually or at death.

@Blossomtoes
I think you are somewhat rude, but never mind. If you have circa £1m you won’t be paying much IHT.

We have given to dc in their 20s. We aren’t waiting to die before they get anything, I was 68 when DM died. Inheriting when you are older usually means you pass it down straight away. Getting a healthy sum in your 20s is more useful in this day and age and we will continue to give and we are actively planning to reduce IHT liability. As most with DC do.

@TizerorFizz the IHT on an estate of £1M is £140K. Whether one regards that as a significant sum depends on one’s net worth and how one feels about paying it depends on one’s values.

I am much more concerned with the possibilty/probability that society as a whole would reject both the notion of modest annual social care insurance premiums and a very modest IHT on all pensioner estates. Even an extra few billion would be something, and the principle is sound. Cliff edges in general are problematic, I think.

If you have circa £1m you won’t be paying much IHT.

I didn’t say that. I said that’s what they’ll get tax free. It’s a bit rich to accuse someone of rudeness when they get frustrated because you’ve failed to read their posts properly and then misrepresent them.

@poetryandwine It’s not. You can be exempt for up to £1m depending on financial circumstances. We certainly are. You must leave everything to your spouse and meet the criteria set out by the government. However I’m not saying this might not change.

What people don't realise is that the residence nil rate band tapers away with estates over £2m, so those with larger estates are back to having only £325k of a threshold (or doubled if spouse's exemption also available). The number actually eligible for a £1m exemption is smaller than you think.

Thanks, @TizerorFizz . I had forgotten that.