The long awaited announcement on the Government’s plan for health and social care has received mixed reviews, but it is a definite step in the right direction for some who have been given reassurance on their care costs even though it increases the tax and social security burden for workers and savers to a record level.
How will it all be paid for?
A cap on the amount to be contributed to care costs during lifetime is proposed at £86,000, with no contribution to be made where total assets are less than £20,000.
This will be paid for with an increase of 1.25% to employee’s and employer’s national insurance and the national insurance paid by the self-employed. There will also be a 1.25% increase to the rates of tax applicable to dividends.
The additional NI charge will be introduced from April 2022, when NICs for working age employees, self-employed and employers will increase. Individuals who have reached the state pension age who are exempt from paying employee’s NI will remain exempt from the additional charge during this year.
From April 2023, once HMRC’s systems are updated, the 1.25 per cent Levy will be formally separated out, similar to the apprenticeship levy, and will also apply to individuals working above State Pension age, and NICs rates will return to their 2021-22 levels.
The increase to the rates of dividend tax will apply to all from April 2022 but the £2,000 dividend allowance and the exemption for dividends held through ISA and pensions will remain unchanged.
With the additional tax on investment income targeted on dividends, there is no additional contribution from those with other forms of investment income such as buy-to-let profits, capital gains or interest received.
What is the plan for Social Care?
The population of the UK is living longer and consequently have greater need for social care in later life. It is rare for families to support the elderly or sick in multi-generational homes with reliance on external care providers being the norm. But accessing support can be a lottery, with both adult and children’s social care provided under separate rules and regulations. There can be a fine line between medical and social care. Availability of local authority services often depends on how they spend their budget, while other services may be provided on a universal basis by health authorities. Support will often only be available to those who can afford to pay, causing debt and anxiety for those without adequate financial means.
Section 9 of the Care Act 2014 requires a local authority to provide an assessment of an adult’s need for care and support where it appears that an adult may have those needs. The assessment is not means-tested.
If there is agreement that care and support is required then the local authority can facilitate the provision of that support, but depending on the adult’s circumstances, may charge for the support provided.
There are three basic levels of support:
1. Preventative/wellbeing social care – means tested
2. Intermediate care and reablement – can be free of charge for up to 6 weeks (e.g. post hospital discharge), and adaptations up to £1,000 can also be provided free of charge
3. Continuing Health Care – usually provided by NHS and no financial contribution required
In “Our Plan to Rebuild: The UK Government’s COVID-19 recovery strategy” published in 2020, the paper confirmed the Government’s commitment to deliver its election manifesto promise to reform social care. Although additional funding was made available for social care during the pandemic, it did not change the underlying inadequacy of the system itself.
The Build Back Better document that accompanied the Government’s announcement on 7 September 2021 acknowledges that it is necessary to “integrate and innovate” to reform social care. The key to long term reform has to be better integration between health and social care, not simply additional funding. Money has to be used effectively and efficiently and the promise that it will be ringfenced for frontline operations will provide comfort, but there is still a lot of scepticism as to how the funds will flow through and make a difference to social care when they will initially be focussed on funding a catch up exercise within the NHS.
The forthcoming White Paper will provide more information. The key questions that taxpayers and carers and those needing care want answered are:
It is not simply about a cap on contributions to care costs, UK taxpayers want to see a better system for the additional contributions that will be made.