The long-awaited details of funding new social care plans for England have been released – with associated UK-wide tax rises.
The basis of the new English social care regime was announced by the Prime Minister in September this year, with an update in November. Its key features are:
- Start date The new regime will only apply in England from October 2023. Any care costs incurred before then are ignored.
- Fee cap A cap of £86,000 (index-linked) on the total care costs you must pay from your own resources will be introduced. This will cover only your personal care costs not the so-called ‘hotel costs’ of care, which will be set at a flat £200 a week.
- Capital limits The upper capital limit above which you must meet all your care costs (until the fee cap is reached) will rise from the current £23,250 to £100,000. The lower capital limit, below which you are not required to use your savings, increases from £14,250 to £20,000.
- Income tariff If you have capital between £20,000 and £100,000 you will be required to make an ‘income tariff’ contribution from that capital, which will be £1 a week for each £250 of capital over £20,000.
The corresponding tax rises begin from next tax year and will operate throughout the UK.
- All the main and higher rates of National Insurance Contributions (NICs) for employers, employees and the self-employed will effectively rise by 1.25 percentage points.
- From 2022/23 the tax rates on dividends will also increase by 1.25 percentage points.
Despite the large tax rises, the changes could still leave you having to meet all your social care costs, something that you should consider building into your retirement planning.
The value of tax reliefs depends on your individual circumstances. The Financial Conduct Authority does not regulate tax advice and tax laws can change.
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