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National Insurance Contributions for Care Funding

Published: 10 September 2021
Time to read: 3 mins

Big news this week has been that The House of Commons has voted to approve the income tax and national insurance contribution (NIC) increases proposed by the UK Government.  The aim of the increase is to raise an extra £36 billion to reform the funding of long-term health and social care over the next three years.

From April 2022, there will be a temporary 1.25% increase to both the main and additional rates of NICs for the 2022/23 tax year and revenue raised will go directly to support the NHS across the UK.  In addition, income tax on dividends will increase by 1.25%.

From April 2023 onwards, the NIC rates will decrease back to 2021/22 tax year levels and be replaced by a new 1.25% Health and Social Care Levy and from April 2023 people over the state pension age who are not currently paying NIC will be required to pay the Social Care Levy.

It was announced that the policy also places a cap of £86,000 on an individual’s lifetime care costs in England and raises the means-testing threshold for state contributions towards the cost of care to £100,000.  It should be noted however, that this cap is restricted to the cost of care and there does not appear to be a cap on the cost of “food and accommodation” which often comprises the bulk of the cost of care to individuals.

What does this mean for care in Scotland?  The higher NIC, Social Care Levy and dividend income tax will apply to residents of Scotland and the Prime Minister set out that there will be an additional £1.1 billion of funding paid to the Scottish Government.  This is to be ring-fenced for spending on health and social care although it will be for the Scottish Government to decide how that spending is allocated.

For individuals receiving care in Scotland, the announcement will have little impact.  The cap of £86,000 and the threshold of £100,000 will not apply in Scotland.  Since July 2002 the Scottish Government has made a weekly contribution to personal and nursing care for those in residential care.  That contribution is £193.50 per week for personal care and £87.10 per week for nursing care which is widely claimed to be to “free personal and nursing care in Scotland”.

In Scotland, there is no cap on the cost of the food and accommodation element of residential care.  It remains to be seen how the care element of residential care costs is allocated in England however in Scotland, it is generally capped at the contribution made by the Scottish Government.

This means that an individual in residential care with over £28,750 in capital will be required to pay for their care.  Where the amount of capital reduces to £18,000 the individual is no longer required to pay and between these figures the local authority pays more, and the individual pays less.  This means that the cap in Scotland is in effect £18,000 and the recent announcement will have no impact.

If you would like to discuss any aspect of payment for care contact Karen Wooton who will be delighted to assist.

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