Health and social care levy

health and social care levy

This page was last updated on 1 September 2021

Health and Social Care Levy In 2021

The article below is a round up of what was announced by the Prime Minister, Boris Johnson, with regards to the Health and Social Care levy on 7 September 2021.

Topics that you will find covered on this page

You can listen to an audio recording of this page below.

What was announced

This is an overview of what was presented in the House of Commons.

  • The NHS is getting £36bn over the next three years “to fund the biggest catch-up programme in the NHS’s history, tackling the Covid backlogs”.
  • Adult social care will be reformed to stop people facing “unpredictable and catastrophic costs”, which for some people can exceed £100,000.  

 

How will the social care be funded

  • This will be done through a new UK-wide 1.25% “health and social care levy”.  It will come in from April 2022, and will be based on national insurance contributions. It will be paid by working adults, including people over the state pension age and will also be paid by pensioners (who currently do not pay any national insurance). The 1.25% levy will also be paid by employers, meaning that the cost is being shared. More information on this below. 
  • From April 2022 national insurance contributions rates will go up by 1.25%. However, from April 2023 the levy will be separated, so that the levy will appear as a separate line on pay slips. This is known as a a ‘hypothecated tax‘.   

 

How much will you have to pay

  • What you pay will be based on what you earn. For example, a basic rate taxpayer earning £24,100 will pay £180 a year, or £15 per month. A typical higher rate taxpayer earning £67,100 – in the top 15% of earners – will pay about £40 per month.
  • Additional rate tax payers (those paying the highest rate) will, according to the Government, contribute 20% of the revenue, even though they represent 2% of taxpayers.
  • Higher rate taxpayers, which according to the government represent 14% of the total – will pay half the revenue.
  • Around 6 million people earning less than £9,568 will not have to pay.
  • Dividend tax is going up too by 1.25%, to ensure people who receive income through dividends make the same contribution.  
  • Businesses will pay the most of the extra revenue.  This will come from the increase to employers National Insurance Contributions. According to the government this means 70% of the money coming from the biggest 1% of employers, which is defined to be those with more than 250 employees.
  • 40% of all businesses (mostly small business) will not have to pay anything extra.
  • No 10 says that, because employers also contribute, raising NICs is fairer than raising income tax. To raise this money from income tax, income tax would have to go up by 2%. A typical basic rate taxpayer would pay around £230 a year, instead of £180. For a higher rate taxpayer, that would be £1,090 instead of £750.
 
 

What do other countries do

  • The government says that France, Germany and Japan have all increased social security contributions to fund social care.

Support for the NHS

  • According to the government the NHS will get an extra £12bn a year for investment in frontline care over the next three years.
  • The new funding will be used to fund an extra 9 million checks, scans and operations.
  • By 2023-24 activity levels in the NHS will be 110% of what it was pre-pandemic.

Reforms to adult social care

  • Currently anyone with assets over £23,250 has to pay their care costs in full. That means around 1 in 7 people pay more than £100,000. From October 2023 the system will change and anyone with assets worth less than £20,000 will have their care costs fully covered by the government. Anyone with assets between £20,000 and £100,000 will be expected to contribute to the cost of care, but will also be eligible for state support covering some of the costs. This support will be means tested.
  • No one will ever have to pay more than £86,000 for care in their lifetime – roughly equivalent to three years of care.
  • The system will be made fairer, so that people who pay for their own care do not have to pay more than state-funded individuals for equivalent care.
  • The NHS and the care system will also be brought closer together.

Devolved governments

  • Scotland, Wales and Northern Ireland will get an extra £2.2bn in health and social care spending as a result of the levy. According to the government there is “a clear union dividend from this policy”.

This information is based on an update from the Guardian.

Article author

Katy Davies

I am a keen reader and writer and have been helping to write and produce the legal content for the site since the launch.   I studied for a law degree at Manchester University and I use that theoretical experience, as well as my practical experience as a solicitor, to help produce legal content which I hope you find helpful.

Outside of work, I love the snow and am a keen snowboarder.  Most winters you will see me trying to get away for long weekends to the slopes in Switzerland or France.

Email – katy@helpandadvice.co.uk

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