Many will probably have seen that the latest topic of debate in Parliament is Social Care and how it is in dire need of further funding and reform. The social care system has faced large amounts of complaints and criticisms for many years now and this for most is a long overdue topic that needed to be reviewed. With the impact of the pandemic to add to further pressures, the Prime Minister has today announced proposals which will impact everyone, but what are they? Not too much has been revealed but this is what we know.
Health and Social Care Levy
The first announcement made was that everyone will have to pay increased National Insurance contributions. Currently everyone who works has to make National Insurance contributions which usually come from source of pay (if an employee). These however will be increasing by 1.25% and is being labelled as a Health and Social Care Levy. It has been proposed in this way so that everyone will then contribute further based on their income (so those with higher income pay more). By being a separate tax (as opposed to being an increase in income tax) the government has argued that it will go directly to where it is needed, the NHS and other supporting social care services.
The government has also proposed that tax on dividends will be increased as well by 1.25%. Therefore this will only affect individuals who own shares that produce an income (ie dividends).
It is believed that these increases will come into effect from April 2022. Then in April 2023 the Health and Social Care Levy will appear as a separate tax contribution as opposed to being part of National Insurance contributions.
Care Fees
The government today have announced proposed changes including caps on contributions by an individual and a change in the threshold for payment.
From October 2023, it has been proposed that a cap will be introduced on the amount that an individual will have to pay for care during their lifetime. Currently there is no cap and so someone who requires care for significant periods of time will have to pay huge sums for necessary care until their assets fall within the thresholds. This means some individuals can pay well over £100,000 depending on circumstances and assets. The cap proposed however is that an individual will only pay a maximum of £86,000 across their lifetime towards care fees, after which the state will then fund further care.
Although this sounds a lot still, it is a possible step in the right direction. Something that does remain to be seen however is to what extent this will impact care home fees as the government has stated that this cap will only apply to care provided and not accommodation.
In addition to the proposed cap, there is also a proposed change in the thresholds for paying for care. Currently anyone with assets over £23,350 will have to pay their care costs in full. Those with assets below £23,350 may have to make contributions towards the care costs until they reach a lower threshold of savings (approximately £14,000).
However under the new proposals, anyone who has assets below £20,000 will not have to pay anything towards their care. If you have assets between £20,000 and £100,000 then you will be eligible for means-tested support towards your costs. Again full details of these are expected over the coming weeks.
With the announced proposals, the government is aiming to raise over £36 billion from the tax increases and Health and Social Care Levy which they claim will be put towards the NHS and social care system in the UK but much of this of course could still be subject to change and won’t be taking effect at least until the next year or so. There is also a lot to be disclosed about the social care reforms towards care fees so we will have to watch what happens.
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