Stop tax on interest received on savings capital invested for care costs

NORFOLKBART

Hi, I have asked my MP to raise this issue on my behalf with both the Treasury and hopefully in the house but I would be interested to hear other people's views.

My mother has been in residential care since February 2024, paying approx. £1300/week net of Funded Nursing Care in care costs. Initially her savings were used to fund the cost of care but last September we were forced into selling her home to provide the capital to meet ongoing costs. We have invested the net sale proceeds with NS & I and the monthly interest of course helps with the monthly care costs (balance from her income and capital). What I find grossly unfair is that the interest my mother is earning on the capital from the sale of her home is being taxed, when that could also be used towards care costs.

I have asked my MP to request that the Treasury/chancellor consider an exemption from savings tax on interest earned on capital from sale of property for those individuals who have had to sell their home/invest the proceeds to provide for their care.

Thoughts, please?

Isthisforreal99

Going to have to disagree. What's the difference to someone funding from their pension income that may already have been taxed. Depending on other income an individual may get up to £6000 investment income tax free anyway, example being an individual who's sole income is state pension below the personal allowance.

born_again

Title is all wrong

Capital is tax free, only interest incurs tax, but NS&i offer tax free savings.

If you do not have one of the above, then look at splitting savings to make use of the tax free offers.

https://www.nsandi.com/tax-free-saving

NORFOLKBART

https://forums.moneysavingexpert.com/discussion/comment/81869516#Comment_81869516

Title updated.

eskbanker

You still don't explain exactly why you feel it's unfair? Every UK tax resident individual is treated the same for income tax purposes so there would need to be a compelling reason to change that*, and the fact that the money is being spent on care costs really isn't sufficiently convincing IMHO.

Apart from anything else, if she runs out of money, the local authority will step in with funding, so what the government 'takes away', they'd potentially ultimately 'give back' anyway, or is this indignation perhaps related to inheritance?

Even in financial terms, if, for the sake of argument, she has a £250K pot earning 4% for £10K interest, then the most that would be paid in tax is £2K (assuming no mitigation), i.e. the pot would be £258K instead of £260K after a year, which is hardly significant?

*until the potential future tweaks to eliminate small liabilities for those only receiving state pension

Grumpy_chap

Income is income and subject to income tax.

For savings generating income (interest) there are some tax-exempt vehicles available such as ISA's.

I don't see how there could be a set aside for interest generated on savings "that are to pay for my future care" because, surely, everyone would then simply add that label to any savings they held?

J63320

The only way this could possibly work would be to have a product analogous to a LISA where the money could only be used to pay care costs. But putting conditions in place to prevent misuse might be difficult e.g. family members trying to claim money for providing care. And in the same way that the various schemes to help first-time buyers have only contributed to the rise in house prices, I’m sure that the owners of the care homes - those lovely private equity investors based in tax havens - would notice that their clients had a little more money and would be only too happy to raise their rates accordingly.