The Prime Minister today set out “reasonable, fair and necessary plans” to tackle the Covid backlogs in the NHS, reform adult social care, and bring the health and social care system closer together on a long term, sustainable footing.
The Government announced that £36 billion will be invested in the health and care system over the next three years, “to ensure it has the long term resource it needs”.
To fund this investment a new Social Care Levy will be introduced from April 2022, ring-fenced for health and social care. This will be based on National Insurance contributions (NICs) and will effectively mean a 1.25% increase to national insurance contributions for employers, employees and the self-employed.
From April 2023, workers over the state pension age will also pay the levy.
From April 2022 the rates of dividend tax will also increase by 1.25% to help fund this package.
The increase in tax on dividends was a surprise but understandable considering no national insurance liability is levied on dividend payments. Increasing the tax on dividends ensures the new social care levy cannot be avoided by the payment of dividends.
The Health care reforms announced ensure no one in England will now have to pay more than £86,000 in care costs over the course of their lifetime. This is equivalent to around three years in care.
This will apply regardless of where they live, how old they are, what their condition is, or how much they happen to earn.
At the same time, the government will support those without savings – with the state covering all care costs for anyone with assets under £20,000.
Anyone with assets between £20,000 and £100,000 will be expected to contribute to the cost of their care but will also receive state support, which will be means-tested.
In addition to the health care reforms, the government also announced that the Pensions triple lock has been suspended for one year from April 2022 meaning pensions will increase by inflation next year to avoid a potential 8% increase in line with wage increases caused by anomalies during the coronavirus pandemic.
Please let us know if you would like any further information regarding the tax changes or whether you would like to discuss retirement planning with the team at RPG Chartered Financial Planning. Please email email@example.com.