Out-Law News | 09 Sep 2021 | 5:46 pm | 2 min. read
Its plan for health and social care is based on additional funding of £36 billion for the sector, to be raised in part through a new 1.25% health and social care levy paid on the wages of every UK working adult. The dividend tax rate will also increase by 1.25%. The Scottish, Welsh and Northern Irish governments will receive a proportionate share of the money raised.
The levy is planned to be introduced from April 2022 and will originally be based on National Insurance contributions (NICs), ultimately becoming a separate tax once HMRC systems are updated. It will be payable by those over the state pension age who are in work, who do not pay NICs.
Money raised from the levy will be ring-fenced for investment in frontline health and social care. The government is targeting a 110% increase in planned NHS activity – an additional nine million appointments, operations and treatments – by 2023-24, to address the backlog caused by the Covid-19 pandemic. The government has promised “new, innovative practices” and better use of technology, focused on prevention. A white paper on better NHS and social care integration will be published later this year.
Partner, Head of Healthcare
A lot of the extra funding is likely to be needed to increase wages to keep people working in social care settings, bring vulnerable people back into a care system which has previously had to ignore them, appropriately fund the regulators and encourage healthy levels of competition
Health and social care expert Joanne Ellis of Pinsent Masons, the law firm behind Out-Law, said that the announcement “comes at a point when the health and social care sector is already deeply in crisis”.
“A lot of the extra funding is likely to be needed to increase wages to keep people working in social care settings, bring vulnerable people back into a care system which has previously had to ignore them, appropriately fund the regulators and encourage healthy levels of competition – and therefore value and quality – in the private parts of the sector,” she said. “Whether the sums can do all of this whilst also facilitating a cap on an individual’s contribution to their care remains under question.”
The government is proposing a lifetime cap on care costs in England of £86,000 per individual from October 2023, equivalent to around three years in care. The cap will apply to the cost of actual care and not, for example, accommodation. Individual contributions will be means tested based on savings: those with less than £20,000 in assets will not have to contribute from their assets at all; while those with between £20,000 and £100,000 in assets will receive means tested state support. Currently, only those with below £23,250 in assets are entitled to state support with the cost of care.
New training and qualification opportunities will be made available to social care workers, details of which will be set out in a government white paper to be published later in the year. The plan will also set out how local authorities and private sector care providers will be able to invest in technology and deliver innovative methods of care.
The new health and social care levy will initially be introduced in April 2022 as a 1.25% increase on Class 1 NICs payable by employers and working age employees, and Class 4 NICs payable by the self-employed, including partners. From April 2023, once HMRC’s systems are updated, the levy will be charged separately, and will also apply to individuals working past the state pension age. NIC rates will return to their 2021-22 levels at this point. No changes will be made to Class 2 self-employed NICs or Class 3 voluntary NICs. Existing employer NIC reliefs will be unaffected.
A UK-wide 1.25% increase in the dividend tax rate, payable by those who receive dividend income from shares, will also take effect from April 2022. Existing reliefs will again apply: for example, shares held in ISAs are not subject to the dividend tax.
The government plans to introduce a “legal requirement” that money raised from the levy must be spent on health and social care.
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