Building an annexe can be costly and may need planning consent
Notwithstanding that you are already able to receive a council tax concession for annexes occupied by a relative over the age of 65 or a disabled person, and it is unclear how many “grannies” who are not able to take advantage of the concession now would be able to do under revised plans, it does at least show that the Government is listening to campaigners on the issue of housing for the elderly.
Let’s be clear here. No Government policy should ever be devised that would evict the elderly from their homes; or deliberately make larger properties unaffordable for people in retirement in order to force them out. However, it is clear that many older people do already occupy homes that they find unmanageable and unaffordable and would welcome assistance to move. The major obstacle to achieving this aim is not simply that it means abandoning a much-loved family home, but that the money raised from a sale, after costs and taxes, may not leave enough left over to make the exercise of moving to a smaller home worthwhile.
Moving in with relatives, however, softens the blow of leaving a family home. But there is precious little incentive for the younger generation to accommodate older family members.
Not many people have a house with so much extra accommodation that they could offer a home to an elderly relative. Building an annexe is costly and needs planning consent. Easing tax and planning restrictions could go some way towards overcoming this hurdle where space and funds permit.
How much better if the two families could sell their existing properties and move in together to a larger property, or an older person with a large home could take in a relative or carer and give them their home.
The snag here is the tax rules. If the elderly person sells her home and gives the money to her son to buy a house and then moves into that house, the gift of the money is potentially liable to tax – either income tax under the “pre-owned asset” tax rules or inheritance tax under the “gift with reservation rules”, because the older person continues to benefit from the gift. Likewise, the older person cannot give her home to her carer and continue to live in it without fears of IHT. If the older person’s estate is liable to inheritance tax and the house has to be sold to pay for it, the carer - who may have abandoned her own home to care for the elderly person - will find herself without a roof over her head.
The Government needs to rethink the inheritance tax laws. The reform could still prevent the wealthy simply giving away valuable property to their children thereby depriving the Exchequer of much needed revenue. Rewritten rules could, however, reward the younger generation if they care for the older generation by giving them financial incentives to do so. This would surely benefit us all.
Who knows, but there could be an answer in there somewhere, not just to the question of how to house the elderly and house families who need bigger accommodation, but even the seeds of an answer to the crisis in elderly care. We should be encouraging the old and the young to live together as they do in other cultures, and as we once did before we all became obsessed with owning our own properties and living in separate cells.