CARE COSTS IN ENGLAND
In early September 2021, the Government revealed initial details of its long-awaited plans for funding social care in England. While the other constituent parts of the UK each have their own care funding rules, they are all influenced by the approach adopted in England. A little over two months later some unwelcome clarification on the new English framework emerged.
At the heart of the plan is a reworking of the structure created by the Care Act 2014, itself the product of the Dilnot Report produced in 2011. There are three key aspects of the new regime:
1. REVISED CAPITAL LIMITS
At present, if your savings and other wealth (potentially including the value of your home) amount to more than £23,250, then you must meet all your long term care costs. However, if your savings and other wealth are below £14,250 you will not have to touch them, although you will still be subject to an income-based means test to assess any personal contributions to your care costs. In between those two capital limits, a sliding scale of capital contribution applies – effectively meaning contributions of 20.8% a year of any capital over £14,250.
Under the new regime, the capital limits will rise to £100,000 and £20,000, with the in-between capital contribution still based on 20.8% of the excess over the lower limit. That could mean a payment of over £14,500 a year if you are assessed to have £90,000 of capital.
2. CARE COST CAP
Your liability to pay for care will end once an £86,000 (index-linked) ceiling is reached. In September, the Government emphasised that this cap applied only to personal care costs, not ‘hotel costs’ such as accommodation and food. Two months later it confirmed that hotel costs would initially be set at £10,000 a year, regardless of the true cost. Not such good news was the simultaneous announcement that the basis of the cap had changed from that in the Care Act 2014. Instead of the £86,000 total applying to fees paid by the individual and their local authority, only the individual’s outlay would count towards the cap. The implication was that many more people would never see the benefit of the cap, given the average stay in a nursing home is less than three years.
3. MEETING THE COST
To fund the reform, NICs for employers, employees and the self-employed will increase by 1.25 percentage points, meaning that basic rate taxpaying employees will face an NIC rate of 13.25% – just shy of two thirds of their income tax rate. Dividend tax rates will also rise by 1.25 percentages points, e.g. from 32.5% to 33.75% if you are a higher rate taxpayer.