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Government to Freeze IHT Threshold to Fund Elderly Care

Chancellor, George Osborne, said in his Autumn Statement that the Inheritance Tax (IHT) threshold would remain unchanged at £325,000 throughout the 2013/14 and 2014/15 tax years but should increase to £329,000 in 2015/16.

However, according to the Sunday Times this week, it now transpires that the Treasury plans to freeze the amount Britons can inherit tax-free, until at least 2019. This means thousands of families will be £95,000 worse off than if the IHT threshold had gone up in two years' time as Chancellor George Osborne pledged just eight weeks ago.

The move will lead to 5,000 more people paying IHT and is expected to result in an additional £1 billion over the next five years, to fund plans to help pensioners with their home care bills.

The plans, to be announced by Health Secretary Jeremy Hunt, are there to "protect people's inheritance" and will see pensioners with savings of up to £123,000 getting state support with their care bills. The means-tested threshold will increase to £123,000 from £23,250, with a sliding scale of aid. The asset limit is above the £100,000 recommended by the independent Dilnot Commission appointed by David Cameron. However, the cap on what every pensioner will have to pay for care will likely be set at £75,000, which is double the £35,000 recommended by experts. The elderly will still be required to meet accommodation costs for stays in care homes, which will be capped at £12,500 a year, the Sunday Telegraph reported.

The measures are set to cost the Treasury some £1 billion annually by 2020 and are touted as unprecedented financial support for pensioners, set at the right level when taking into account the pressure on public finances.