Rachael Griffin, tax and financial planning expert at Old Mutual Wealth comments:
“In his budget Philip Hammond reassured the public that the controversial death tax was off the table. However, that promise could be broken as quickly as it was made, as the Conservative Party are rumoured to be considering it as a way to fund the social care crisis.
“IHT is always an easy target for policymakers when they are looking for funding as inheritance tax has traditionally seen as something that only the ‘rich’ are subject to. However, with the surge in property values, the IHT net has grown wider. A recent report from the CEBR reveals that the UK is becoming an ‘inheritance economy’ and the average value of inheritance is set to surge by 47% by 2027.
“However, this increase in inheritance does not equate to the younger generations being able to afford anything it desires. It is coupled with a growing intergenerational inequality. The IFS has revealed that pensioners have seen their average income grow nearly 15 percent since 2007/08 thanks to the triple lock. Meanwhile, young adults have only just started to recover median income levels last seen before the recession.
“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.
“When it comes to funding social care the government should be looking outside their traditional route of IHT and consider a road less travelled. They could look to use the pension system and allow people to channel their funds into products such as care annuities tax free.”