Social Safety: What’s the New Well being and Social Safety Tax and How Will It Have an effect on Me?
By Anthony Reuben & Tom Edgington
Image sourceGetty Images
The government has announced an additional tax to fund social care in England and help the NHS recover from the pandemic.
But there has been criticism – also within the Conservative Party – that it will be unfair to younger people and low wage earners.
What are the new plans?
Employees, employers and the self-employed will pay 1.25% more taxes from April 2022.
For the first year this is charged as an increase in social security.
But from April 2023, national insurance will return to its current rate, and the additional tax will be levied as a new health and social contribution.
In contrast to national insurance, this tax is also paid by state pensioners who are still in employment.
How much will the tax change cost me?
The increase calls for an employee with £ 20,000 per year to pay an additional £ 130. Someone with £ 50,000 pays £ 505 more.
Individuals earning less than £ 9,564 will not have to pay Social Security and will not have to pay the new levy.
National Insurance is a UK tax – and while Boris Johnson’s announcement focused on funding health and welfare in England – Scotland, Wales and Northern Ireland are receiving an additional £ 2.2 billion for their services.
What is national insurance?
- It is an income tax paid by both employees and employers; Self-employed people also pay it on their profits
- It was introduced in 1911 to provide a fund for workers who had lost their jobs or needed medical treatment
- It is now used to pay the NHS, benefits, and the state pension
- The money is said to go to a “special purpose” fund – which means it must be used for these purposes – but the government can borrow from the National Insurance Fund to pay for other projects
What are the criticisms of the tax increase?
There are concerns that the increase will have a greater impact on the low-wage workers.
Currently, workers pay 12% of Social Security on earnings between £ 9,564 and £ 50,268. However, anything earned beyond that amount only attracts a rate of 2%.
As a result, as your income rises above £ 50,000, Social Security becomes an increasingly smaller part of your wage package.
The same rate also applies to health and social contributions.
The government also goes back to a promise made in its 2019 election manifesto not to raise National Insurance.
However, Boris Johnson said the increase was necessary given the pandemic and the strain on the NHS.
What is the tax increase used for?
The government says the changes are expected to bring in £ 12 billion a year, which will initially serve to ease pressure on the NHS.
A part will then be transferred to the social system over the next three years.
This is particularly useful for older people and people with a high need for care with tasks such as washing, getting dressed, eating and taking medication.
The aim is for people in England to pay no more than £ 86,000 in care costs (excluding room and board) by October 2023.
In addition, the care of those with assets less than £ 20,000 – such as their home or savings and investments – is fully taken care of by the state.
Individuals with assets of £ 20,000 to £ 100,000 will receive a subsidy for their care costs.
What is the current arrangement?
To have your local council pay for your care you must currently have very high needs and less than £ 23,250 worth of savings and assets in England.
Below this level, the amount you have to pay is reduced until you have less than £ 14,250. At this point, the community will pay for your care if you are entitled to it.
The care system is under pressure due to the aging population and the pandemic. It is affected by staff shortages and falling government spending.
This has also put pressure on the NHS as people cannot be discharged from the hospital if they do not have a suitable location.
What’s happening in the rest of the UK?
In Wales, no one entitled to home care is expected to pay more than £ 100 a week.
No one in Northern Ireland pays for home care over the age of 75.
Scotland offers free personal attention to people who need home support regardless of their age.
In Scottish nursing homes, people receive free care if they have savings or assets of less than £ 18,000.
Individuals with savings and assets between £ 18,000 and £ 28,750 will need to fund some of their care.
People with more than this will have to pay for their own care, apart from a weekly contribution of £ 193.50 for personal hygiene and £ 87.10 per week for care.
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