This week the government announced reforms to social care, increasing National Insurance and Dividend Tax. Whilst National Insurance increases will be applied across all of the United Kingdom, the details around whether the new social care cap is to be adopted in Wales, Scotland and Northern Ireland is yet unconfirmed. The below details at present only apply to people living in England – we will keep you updated is and when the Welsh Government announce any changes.

New cap on care costs
The government has announced a new cap on the amount of care costs people will pay in their lifetime, should they require care in England. This cap is set at £86,000 and is starting from October 2023.
This means anyone entering care from this date onwards will be subject to the cap and anyone in care before this will not be, meaning these people have potentially much greater care costs to pay.
Whilst imposing a cap is good news on the face of it, the devil is in the detail as is often the case with these types of announcements.

There are three levels to the amount a person needs to contribute to their care, depending on the amount of assets (including their home) that they own:

  1. Those with total assets worth over £100,000
    Full fees must be paid. The maximum that a person will have to pay over their lifetime towards personal care costs will be £86,000 as a result of the new cap. If by contributing towards care costs, the value of a person’s remaining assets falls below £100,000, they are likely to be eligible for some financial support. Once the £86,000 cap is reached, Local Authorities will pay for all eligible personal care costs. No-one will need to make a contribution from their income towards these care costs. People may choose to “top up” their care costs by paying the difference towards a more expensive service, but this will not count towards the cap.
  2. Those with total assets between £20,000 and £100,000,
    Their Local Authority is likely to fund some of their care.
    People will be expected to contribute towards the cost of their care from their income, but if that is not sufficient, they will contribute no more than 20 per cent of their chargeable assets per year. If by contributing towards care costs, the value of a person’s remaining assets falls below £20,000, then they would continue to pay a contribution from their income but nothing further from their assets.
  3. Those with total assets are less than £20,000
    They will not have to pay anything for their care from their assets. However, people may still need to make a contribution towards their care costs from their income.

The cap only covers the cost of health care and does not account for living costs. This means food, accommodation and energy bills. Care homes don’t usually itemise these costs, so it is hard to know how much this could be on top. Think about how much you spend on these things and it’s clear to see how the headline cap amount isn’t quite so generous as it first seems.
To help pay for this cap and to help the NHS clear backlogs created by the Pandemic, the Prime Minister has announced two tax increases from April 2022:
• Additional National Insurance (NI) contributions of 1.25% on all employees and employers
• Additional 1.25% tax on dividends from investments drawing from businesses

NI is paid by those during their working lifetime and stops when they reach State Pension age. However, from 2023 this additional contribution will continue to be paid by those who stay in work after their State Pension age.

If you would like to read further information, this BBC news article has covered it well:

If you’re concerned about the cost of care for you or a family member, please do get in touch and we’ll discuss how we may be able to help with planning for this.