New Health and Social Care Tax Reforms
A new health and social care tax has been introduced across the UK to pay for reforms to the care sector and NHS funding in England.
Much of the revenue initially will be devoted to cutting waiting lists in the NHS, with social care receiving just £5.3bn of the £36bn expected to be raised over the next three years. Longer term, the money will be used to fund the cost of adult social care through tax changes, and to modernise the social care system to ensure it is better integrated with healthcare.
What is the new health and social care tax going to cost?
The tax will begin as a 1.25% rise in National Insurance from April 2022, and will be a separate tax on earned income from 2023.
From 2023-24, once HM Revenue’s computer systems have been updated, the NICs increase will be rebadged as a health and social care levy, which will appear as a separate line on payslips. It will be extended at that point to cover pensioners who are still in work.
How much this will cost will depend upon how much money you earn, and high earners will pay the most. According to Downing Street figures, someone earning £24,100 a year would pay an extra £180 a year. A person on £67,100 would pay £357 more. Those earning less than £9,500 a year, the threshold for national insurance, will still pay nothing, which means that 6 million of the lowest earners will be exempt.
While people above the state pension age who still work do not normally pay national insurance, once the rise is rebranded as a health and social care levy, from 2023, they will pay this.
How will those needing care benefit?
Currently, if people have assets worth more than £23,250, they have to pay for their social care, and there is no cap on costs, meaning some people have to sell their homes to cover these.
Under the social care plans, no-one will have to pay more than £86,000 for care across their lifetime, while anyone with less than £20,000 of assets will get free care. Those with assets from £20,000 to £100,000 and above will have to contribute, on a sliding scale, but with a maximum payment towards care of £86,000, which ministers say is about the equivalent of three years of full-time care.
While the new social care cap will apply only to patients in England, the levy will apply across the UK. The government said health services in Scotland, Wales and Northern Ireland would receive an extra £2.2bn a year.
Do you need financial advice?
We have a team of financial advisers who hold the specialist qualification to be able to provide financial advice on funding Long Term Care and we will be watching the changes to the rules carefully as more information is released.
If you would like to talk to a financial adviser about how you prepare your finances for later in life then please give Furnley House a call. You can reach us on 0116 269 6311 or email us at email@example.com.