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Striking the balance - later life expenditure and tax efficiency - news article image

Striking the balance - later life expenditure and tax efficiency

22 Mar 2019

2 minute read

Q: My parents are living in their own home but it is becoming unmanageable. What should they be thinking about in terms of tax efficiency as well as making sure they have enough resources to cover expenditure such as care fees?

A: The first thing to consider is if their home could cause an adverse effect on health. It is quite common that unmaintained properties can gradually have a negative impact on wellbeing. So, they should think seriously about whether they would be best remaining in their own home and receiving care there or if sheltered accommodation/residential care would suit them better.

 It’s important to recognise that most families, especially in this area, will be expected to pay for their own care. There is some help from NHS funded Nursing Care which is up to £158.16 per person per week and Attendance Allowance which is up to £85.60 per person per week. Beyond this, the funding of care lies predominantly with the family until they are down to their last £14,250 of savings. The exception to this is if they are very ill and qualify for full NHS Continuing Care funding.

 Currently IHT for a married couple with a main residence would be charged at 40% on the excess of their assets over £900,000 – this exemption is rising to £1m by tax year 2020/21. However, if the estate exceeds £2m then the exemption reduces by £1 for every £2 over £2m, down to a minimum of £650,000. This Nil Rate Band (as it is known) can be quite happily retained by your parents to cover their future expenditure and care fees with no IHT consequences. 

Beyond that it is quite difficult to plan for IHT efficiency if their wealth over the Nil Rate Band is tied up in the home, albeit not impossible. However, if they were to choose residential care where their home is sold then it is possible to arrange their affairs in such a way that the excess assets could be removed from the IHT net reasonably swiftly. Crucially, those assets could remain accessible to your parents should the need arise, achieving tax and well-being benefits.

We are holding a talk on this subject on the 30 April from 10.30am to 12pm at the Fairfield Residential Home, 115a Banbury Road, Summertown. 

For more information and bookings please contact

Striking the balance - later life expenditure and tax efficiency - news article image


Tim Davison

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