Reforming the care sector – the new Health & Social Care Levy

This article was written by Clare McLeish, Solicitor at RRL Wills.

Here at RRL Wills Limited we pride ourselves in providing top quality service for all of our clients. We have a vast amount of experience between our team of legal advisors. If you would like to meet to discuss matters further please contact our team on:

01872 276116 / 01736 339322. 

The changes

In September the Government announced changes to the way social care is funded by introducing a new tax in the Health and Social Care Levy Bill 2021-2022. The Government aim is to raise an additional £11.4 billion over 3 years by increasing income tax and National Insurance contributions (NIC). The money raised will exclusively be used to fund health and social care bodies in the United Kingdom.

The new Policy limits an individual’s contributions towards their care costs to £86,000. By the Government’s estimation this will cover up to 3 years care. The fee only applies to personal care and not the accommodation element (for example the room rate, food and laundry).

Currently if you have less than £14,250 the Local Authority will cover all of your care fees, this figure is increased to £20,000. The upper limit is increasing from £23,250 to £100,000. For those people with assets between £20,000 and £100,000 their contribution will be means-tested, the details of which are yet to be finalised but will likely be based on income.

Individual’s with capital in excess of £100,000 will have to entirely self-fund until they reach the £86,000 cap. However, if the care home you choose charges more than the council calculates as the average fee, the ‘excess’ does not count towards the £86,000.

There is no change to the NHS Continuing Healthcare and for those you have assessed medical needs, NHS Funded Care will still pay for the nursing component of your fees.

Tax

Overall, from 6 April 2022:

  • There will be an increase of 1.25% in the rate of class 1 NIC for employees and employers;
  • There will be an increase of 1.25% in the rate of class 1A NIC and class 1B NIC (paid by employers on chargeable benefits-in-kind and items forming part of a PAYE Settlement Agreement respectively);
  • There will be an increase of 1.25% in the rate of class 4 NIC for the self-employed; and
  • The income tax rates on dividend income will increase by 1.25%.

You can read the full impact of the tax changes on RRL’s recent blog post, here: NIC & Dividend rate increase | RRL (rrlcornwall.co.uk)

Caution

Care fees, their cost and complexity is a ripe area for exploitation and various ‘asset protection schemes’  often involving the family home and trusts have been marketed to the public. It is rarely advisable to undertake complex financial planning involving your family home and there can be penalties, court judgements and even criminal consequences where a Local Authority deems that someone has deliberately connived a ‘deprivation of assets’. If you are seeking advice or reassurance our team at RRL Wills include STEP qualified members and are happy to assist.