After days of leaks in the newspapers, earlier this week Boris confirmed that taxes are rising to pay for the NHS and social care, despite an election manifesto promise in 2019 to not raise taxes.
Whilst I am sure you’ve seen the headlines in the press, it’s worth restating what the changes are. Employee, employer and self-employed rates of National Insurance will all rise 1.25% from April 2022. The change will apply to workers over State Retirement Age too.
Also going up is the rate of income tax applied to dividends, rising by the same 1.25% to ensure small business owners cannot avoid the tax by paying dividends to themselves rather than salary.
From October 2023, there will be a lifetime cap on care costs at £86,000. As we understand it, this relates to the ‘care’ element of being looked after and doesn’t include accommodation. This is a really important point because if you choose or need to be looked after in a residential care home, you can basically forget all about the £86,000 cap as the costs will be unlimited if you have to ‘rent a room’ for many years.
There are also changes for the means-testing thresholds for local authority-funded care, with the lower threshold increasing to £20,000 in England.
Anyone in England with eligible assets of less than £20,000 will have their care fees paid in full by their local authority. For people with eligible assets between £20,000 and £100,000, the state will subsidise care fees.
It’s an understatement to say the social care system is creaking at the seams. The front-line workers, whether they be staff in the care home or at the council dealing with the assessments, don’t have the resources to cope and it’s not their fault they are overworked and under resourced: it’s the system.
I know I’ve banged on about it before, but if you don’t have your Lasting Power of Attorneys yet, please get them urgently. Without them, you risk your family not having a seat at the table when decisions are made by social services or other healthcare professionals.
As I understand it, there are 75,000 individuals awaiting a care assessment, and that waiting list has ballooned recently. What that means, is someone who is in need of help is having to deal with it themselves, without much/any state support. At a time when you need help, to have to sit in a queue of 75,000 people is a sad reflection on where we find ourselves as a society.
From April 2023, the increase will appear on payslips as a separate tax, with the revenue “legally ring-fenced” to fund health and social care costs. The money raised, an estimated £36 billion over the next three years, is a number so big I can’t really get my head around it, but I don’t imagine it’s enough. It is a start though.
While the tax rises will apply across the UK, the funding is focused on health and social care funding in England, with Scotland, Wales and Northern Ireland receiving an additional £2.2 billion to spend on their respective services.
According to the Prime Minister, the majority of the tax revenue will go towards helping the NHS catch up with the backlog caused by the pandemic. The government will spend money on improved hospital capacity and space for 9 million appointments, scans and operations.
The tax hikes will also fund £5.3 billion over the next three years towards the cost of implementing changes in the social care system.
Personally, I am happy to pay the new tax – tax rises were inevitable given Government spending recently – and can only hope the money is used as intended and that it makes a difference to the lives of the people who need care, and also to their carers.
This may be controversial, but I am a little disappointed that the Government have not increased the tax for older, wealthy people who aren’t working and have sheltered their wealth in property, pensions and ISAs because these are the very individuals who stand to benefit from the changes in the short-term. Not everyone reading this will agree with me!