Inheritance tax threshold freeze to cover social care bill

A cap on the amount that elderly people pay for social care costs will be partly paid for by a freeze on the inheritance tax threshold, under plans unveiled by Health Secretary Jeremy Hunt.

From 2017, care costs incurred by older people above £75,000 will be met by the Government. Mr Hunt said that an extra 100,000 people would benefit from the reforms, which he described as a 'watershed moment for our country.'

It estimates the cost to the Exchequer at £1 billion a year by the end of the next Parliament. To meet these costs, the Government is proposing to freeze the inheritance tax (IHT) threshold at £325,000 - or up to £650,000 for couples - for three years from 2015/16.

The IHT threshold would usually increase in line with inflation. The decision to freeze it at the current level means that an estimated 5,000 additional people will be affected by IHT each year. In 2007, the Conservative Party pledged to raise the IHT threshold to £1 million.

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