Labour has ruled out income tax increases for those on less than £80,000 a year. The plan could see the annual allowance taper threshold (AATR) reduced to £80,000 to limit the prospect of affording people higher tax relief on their pensions contributions.
Mr Newman agrees that the latter is a possibility, and says: “The AATR is complicated for people to understand, and if more individuals are caught into the net of reduced annual allowance and the difficulties of calculating exactly how much they can put into a pension each year without suffering tax consequences, especially for those with fluctuating incomes, we could see discontent increasing significantly.”
Later-life care
The most controversial pledges to have emerged in the run up to the election is the Conservative stance on later-life care. The party’s manifesto reveals plans to move away from a proposed care costs cap, and raise the threshold of personal assets for state care from £23,000 to £100,000 – with property now included in the means test.
It also plans to introduce a system enabling those who receive care at home to use the value of their properties to defer payments, meaning they can pay it off when the property is sold or when the care recipient dies.
Fierce criticism of the plans saw Theresa May subsequently announce a cap on costs would also be enforced after all.
Rachael Griffin, financial planning expert at Old Mutual Wealth, believes that by bringing property into means testing clashes with the recently implemented Residence Nil Rate Band (RNRB), which essentially means that in the event of a relative’s death family homes can be passed on to descendants free of inheritance tax.
“By bringing this social care aspect in it kind of makes the band irrelevant if you end up needing care.
“Let’s say I have to pay £300,000 worth of care using debt against my house until such time as the local authority will step in and help. If I were to die, then from an inheritance tax perspective, I’d only have £100,000 in my estate in terms of assets, so you would never get to the RNRB space because the value of the house would be that much lower.”
“For people who want to try and do some kind of planning [in the event of] this, it way well be that we see people using life assurance policies more.”
