The prime minister has announced a significant change in social care funding by increasing the rate of National Insurance tax.
This will break a Conservative manifesto promise not to raise tax and has angered several Tory backbench MPs.
The Conservative manifesto (that they stood on in 2019) included a personal ‘guarantee’ from Boris Johnson that “we will not raise the rate of income tax, VAT or National Insurance”.
While the money is billed as social care reforms, much of the tax rise will initially go to the NHS to help cut down on some of the elective procedures backlog caused by the ongoing Covid-19 pandemic.
Most of the other parties represented in the House of Commons have come out against the changes.
What are the social care changes?
Currently, your assets must be down to a threshold of £23,250 or less before your care is funded, and £14,000 before they are fully funded. This often sees social care recipients sell their homes and use their savings to fund their care.
The threshold for care to be fully funded will now be set at £20,000 (though contributions may be made from income). The amount that anyone with assets between £20,000 and £100,000 will pay will now be means-tested and capped at 20% of their assets each year.
In essence, this means that the fewer financial assets someone has, the less they will pay for their care, and the amount anyone must spend on care will now be capped at £86,000 over their lifetime.
The proposals will also include reforms to the recruitment of social care works, as well as money to train care workers and provide professional development training, with mental health resources for staff also being funded.
The reforms will take effect from October 2023.
How does social care work?
The primary purpose of social care is to support the elderly and disabled adults (of various ages).
Both groups will have non-clinical needs that mean they require support, usually in their own homes or residential care homes (though some may receive assistance in supported housing or day centres).
Though it often works closely with the NHS, it is run by local authorities.
Who will pay for the reforms?
Put simply, anybody who pays National Insurance will be picking up the tab for the reforms from next April.
Currently, you pay mandatory National Insurance if you’re 16 or over and are either an employee that earns above £184 a week or are self-employed and making a profit of £6,515 (or more) a year.
You’ll then stop paying contributions when you reach your state pension age.
There is a planned increase of 1.25% for NI contributions. Employers will also have to pay this increase as well as those who receive their income through dividends.
From April 2023, this will become a separate tax that will appear on payslips as a health and social care levy on earned income..
The government claims that this will raise £12 billion a year (over the next three years) that will go towards social care and the NHS.
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