The Conservative Party is rumoured to be considering the introduction of a so-called “death tax” in a bid to alleviate the social care crisis.
The so-called “death tax”, which was originally proposed by the Labour government back in 2010, would be a levy on top of inheritance tax that would help fund provision for social care.
This comes despite chancellor Philip Hammond reassuring the public in his Spring Budget that the controversial death tax proposal was off the table.
However, according to FTAdviser’s parent publication the Financial Times, the Tories are now eyeing up the tax as part of their manifesto, which is due to be unveiled next week.
Yet Rachael Griffin, tax and financial planning expert at Old Mutual Wealth, thinks alternative sources of funding should be found, saying the government should be looking outside their traditional route of inheritance tax and consider a road less travelled.
She described inheritance tax as an “easy target” for policymakers when they are looking for funding, as it’s traditionally seen as something that only the rich are subject to.
Yet she pointed out that the surge in property values means the inheritance tax net has grown wider.
A recent report from the Centre for Economics and Business Research revealed the UK is becoming an ‘inheritance economy’, with the average value of inheritance set to surge by 47 per cent by 2027.
Ms Griffin said: “Younger generations need more help than ever to find their way onto the expensive housing ladder and they are looking to their parents and grandparents to help.
“We know that lots of people that would like to pass wealth down to their families, and give a financial boost to younger generations and the government should not be attacking that mentality."
Figures from the Institute for Fiscal Studies (IFS) revealed that pensioners have seen their average income grow nearly 15 percent since 2007 to 2008 thanks to the triple lock.
Meanwhile, young adults have only just started to get back to income levels last seen before the recession.
The financial expert said the government should look to use the pension system as a way of funding social care instead, suggesting people should be able to channel their funds into products, such as care annuities tax free.
Paul Lindfield, director of wealth management at Sedulo Wealth Management, described the proposal as "sneaky", and said it was unjustifiable and unfair.
“It’s just a tax-take similar to the pension freedoms, expect this is more blatant.”
“I speak to a lot of probate solicitors who say a lot of people are trying to sort probate out themselves and end up getting in a muddle.”
But Mr Lindfield said hitting pensions instead was also wrong, largely because people should be encouraged to save into a pension, meaning a tax-grab could hinder the progress made with auto-enrolment.
He suggested the government could look to corporation tax or capital gains tax instead to fund social care provision.