Charlotte Smith, in our leading Wills, Probate, Tax & Trusts team, looks at the Government's proposed Health and Social Care Levy.
On 9 September 2021 Prime Minister Boris Johnson announced his 'difficult but responsible' proposal for a Health and Social Care Levy, to be launched from April 2022 - a 1.25% increase to National Insurance contributions, contrary to his 2019 manifesto promise not to increase taxes. MPs voted the proposal through the House of Commons last week with a majority of 71.
The additional revenue would be applied to improvements in the adult social care sector, limiting what the Government describes as ‘unpredictable and unlimited care costs’, by widening the threshold for assistance with care costs and capping costs for those in need of care, prioritising delivery of a ‘health and social care system fit for the 21st century.’ The proposed Levy will generate an additional £12 billion per annum to be used for these means, including collecting from those who work beyond retirement age and from shareholders on their profits.
Currently, social care is means tested, meaning that any person with over £23,250 in capital is required to pay the full cost of their care. The intended changes mean that as of October 2023, it has been stated that anyone with £20,000 or less will not be required to contribute to their care costs from capital, though it remains unclear whether contributions will need to be made from income, such as pensions, as per the current rules.
Meanwhile, anyone with assets of up to £100,000 will receive some means-tested support from their Local Authority if care is required at home or in residential care. Anyone with assets in excess of this will be required to pay all costs for the care they require, and if their assets drop below £20,000 as a result of contributions, they will continue to contribute to their care costs from income. Indeed, those with few assets but a good income, perhaps from pensions, may have their applications for assistance rejected.
There will also be a new cap implemented, meaning that once an individual has paid for £86,000. worth of personal care costs across the course of their lifetime, their Local Authority will pay for all ‘eligible care costs’, though individuals will have the option to contribute further funds towards more expensive services if they so choose. The cap does not apply to ‘hotel costs’ – food, accommodation, sundries – which, on average, double the costs care home residents pay.
It has been suggested that only one in eight people in care will ever reach the cap, with average nursing care costs being £3,552 per month and over half of residents passing away within a year of entering into care. However, the Government has stated that everyone will benefit from ‘certainty and security’ thanks to these new proposals. More details on the nuances of both the collection of the Levy and extent of the ‘eligible care’ that will be considered within the cap will be released before April.
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This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.