Inheritance faces £95k 'stealth tax' under LTC reforms

The government is set to impose a £95,000 "stealth tax" on inheritance to help pay for care for the elderly, according to the Sunday Times.

The report said the Treasury will freeze the amount that people can inherit free of tax, rather than raise it in line with inflation to help fund the introduction of a £75,000 cap on social care costs.

It said George Osborne had decided the limit will not go up until at least 2019, leaving thousands of families worse off than if the threshold had increased.

The effect will be doubled when two parents die, because the £325,000 inheritance tax threshold is transferable between married couples. This allows children to inherit up to £650,000 without charge.

The report said the move would mean about 5,000 extra people would have to pay inheritance tax - contributing an additional £1bn over the next five years towards the cost of care home bills.

The move is part of the long-awaited reforms to long-term care costs, set to be announced in full on Monday.