National Insurance And Share Dividends Costing More In Tax While Care Cap To Be Introduced
The Government’s long-awaited social care reforms have been announced, with tax increases confirmed and the cost of care caps to be introduced.
The Prime Minister has now broken the Conservative party’s pledge not to raise taxes, with Chancellor Rishi Sunak calling the move “tough but responsible”.
National Insurance tax will be increasing by 1.25 percentage points from April 2022, and then turning into a separate health and social care tax from 2023. Dividends on shares will also be taxed an additional 1.25 percentage points.
A care cap is to be introduced from October 2023 of £86,000 over a person’s lifetime; anyone with assets less than £20,000 will have their care covered by the state, while those who have between £20,000 and £100,000 in assets will have their costs subsidised through means testing.
Sensing the unpopularity tax increases would inevitably cause, Boris Johnson said “You can’t fix the NHS without fixing social care… and you can’t fix health and social care without long-term reform.”
Care funding experts at Irwin Mitchell say the reforms could end up still costing people a lot of money, particularly as lifespans increase and dementia cases continue to rise.
Expert Opinion“The injection of funds into the social care system is very welcome but it’s taken over a decade to introduce reform that’s essentially a watered-down version of the recommendations from the Dilnot Commission back from 2010.
“The plans announced today lack specifics about attracting quality, qualified individuals into the profession – how can the care profession be propped up if its workers are not cared for and paid appropriately for the work? This is also just considering paid carers, let alone the unpaid carers of which there are many. However, additional funding being made available is a good sign this is a priority for the Government.
“The tax aspect is totally unfair – taxing those who’ve been hardest hit by the pandemic is another blow to the everyday person’s finances. It’s also totally against the Conservative party’s manifesto. While taxing share dividends is one aspect, the Government could go so much further on taxing the wealthiest in society to help pay for social care.
“The tax hike may also affect people’s ability to pay into pensions so they can fund care in 50 years if people are required to pay more tax now. It’s essentially kicking the can down the road for a later generation.
“On the whole, we could still see many paying significant sums for care, which could still cost many their family home or even more. Until we see further detail, the outlook is still likely to leave many anxious about their futures.” Stewart Stretton-Hill - Senior Associate Solicitor
Irwin Mitchell's team of experts will be discussing the social care reforms at the upcoming Later Life Conference on 12th October. Sign up here.