Care costs: The 'most tax efficient way’ of saving money to pay for care revealed

Care is something which can be essential, but it is often expensive. While many people may not be able to save for the prospect of needing care due to other outgoings to focus on, others may opt to set aside some money just in case it’s needed for later on in life.

“Lump sums can be drawn down from a pension fund which obviously gives a finite life to the fund, which may run out at some point depending on the size of fund at the outset and the timescale involved.”

As such, it may be that a person will need to look to other forms of their finances in order to pay for care.

Mr Jacobs continued: “In many cases the main residence therefore becomes the source of funds for the care provision. Depending on the level of care and the timescale involved it may be inevitable for the house to be sold to generate the required funds.

“The disposal of the main residence is in most cases a tax free transaction, which is good news.

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“It is worth noting that some providers are prepared to accept having a charge over the property, in lieu of regular monthly fees, to allow for a reasonable marketing period for the property, to avoid families having to take a lower offer when the pressure is on.”

Mr Jacobs also shared some expert insight into whether there was a way in which a person can pay for care tax-efficiently when they are in care.

“There isn’t anything within the tax legislation currently which affords tax relief for care home provision directly,” he explained.

“As previously mentioned taking the pension route is an option and presumably the Government see this as the obvious route for saving and try to encourage everyone to build up their pensions.