Bills for long-term public and private care in old age are to be capped at £75,000 in England, in a £1 billion move to be funded by dragging more people into the inheritance tax net.

Health Secretary Jeremy Hunt told the House of Commons last night the "historic" reforms, which will see the Government pay for any care bills over £75,000, would save thousands of people from having to sell their family home to pay for care.

Key Points

  • Bills for long term care to be capped at £75k
  • Measure to be introduced in April 2017
  • Move funded by more people paying inheritance tax

But campaigners voiced disappointment at the level of the cap – more than double the £35,000 recommended by an independent commission in 2011.

Plus, thousands more will be hit with inheritance tax bills because of a three-year extension from 2015/16 of the freeze in the £325,000 threshold – £650,000 for couples – under which no inheritance tax is due. Beyond the threshold, the tax kicks in at 40%.

Certainty about bills

Alongside the cap, the health secretary also announced a rise in the asset threshold – defined as money in the bank and the value of your property – beneath which people will receive means-tested Government support for care bills. Currently £23,250, this will rise to £123,000.

The Government says both sets of measures, due to be introduced in April 2017, will benefit around 100,000 people annually who do not currently receive support.

It adds that certainty about the maximum bill they may face will also allow everyone to buy insurance to protect them against the possibility of care costs.

Hunt also announced a lower cap on costs for people who develop care needs before retirement age, as well as free care for those who have needs when they turn 18.

'Homes will still be lost'

Hunt says: "Economic circumstances are challenging, but these commitments demonstrate our determination to help people who have worked hard, saved and done the right thing to prepare for the uncertain hand that fate deals all of us in old age.

"These plans will give certainty and peace of mind about the cost of care, making sure we can all get the support we need without facing unlimited costs."

Shadow health secretary Andy Burnham welcomed elements of the announcement as an improvement on the current "cruel lottery" in the care system.

But denounced the overall package as "modest" and "meek", telling MPs: "This is a step forward, but it is a faltering one. Vulnerable people will still face rising care charges and homes will still be lost."