The Prime Minister has announced a new Health and Social Care Tax to be introduced in the UK from April 2022, to bolster social care and increase funding for the NHS in England.
This tax will begin with a 1.25 percentage point increase in National Insurance paid by both employers and working adults. Income from share dividends, earned by those who own shares in companies, will also see a 1.25% tax rate increase.
It will then become a separate tax – called the Health and Social Care Levy – on earned income from 2023. To be shown separately on payslips, this tax will be ringfenced to fund health and social care costs. Unlike National Insurance, this levy will also be paid by people who continue to work beyond retirement age.
The Prime Minister has stated that the proceeds from this tax will amount to £12bn per year, the majority of which will be spent on increasing hospital capacity and addressing the backlog of appointments, scans and operations created by Covid.
£5.4bn of this tax over the next three years will also go to the social care system, with a cap of £86,000 per person on the cost of care (not including accommodation) during a lifetime being introduced.
Those with between £20,000 and £100,000 in assets will get subsidised social care, determined via means testing.
Those with less than £20,000 in assets will not have to pay towards care costs from their assets at all, but might have to contribute from their income.
There will also be a 1.25% tax charge increase on dividends from April 2022.