Health and Social Care Tax: How will it affect me?

The government are introducing a new health and social care tax in England to spend on improving social care and helping the NHS recover from the Covid pandemic.

However, it is facing a lot of criticism, even from within the Conservative Party, as it is unfair on younger people.

Do I have to pay the new tax, and how much will it cost?

Starting from April 2022, employees and self-employed people will pay more tax, with a 1.25 percent increase in National Insurance.

Then from April 2023, National Insurance will return to its current rate, but a new health and social care tax will begin, at a rate of 1.25%.

For example, Someone on a salary of £20,000 a year will pay an additional £130, while somebody earning £50,000 will pay an extra £505 a year. However, people earning less than £9,564 will not have to pay either National Insurance or the new levy.

Unlike National Insurance though, the new tax, ‘Health and Social Care Levy’, is also payable by pensioners who work.

Meanwhile, employers will pay more National Insurance, plus the levy.

The criticisms

Some people have concerns about the tax increase having a higher impact on those with lower incomes.

Currently, workers pay 12% National Insurance on earnings between £9,564 and £50,268, attracting a rate of just 2% for anything above that.

National Insurance is different to income tax, which has a rate that rises from 20% to 40% after reaching annual earnings of around £50,000.

When the National Insurance increase is replaced by the Health and Social Care Levy, the same principle will still apply.

A former Conservative minister claims the changes would have a disproportionate affect on working people “on lower wages than many others in the country”. He believes they will end up “paying tax to support people to keep hold of their houses in other parts of the country where house prices may be much higher”.

To resolve this issue, some think that the level at which workers start paying the levy should increase. This way it is more in line with the rate for income tax and will protect lower earners.

One of the biggest causes of contention though is the fact that the government’s 2019 manifesto said it would not raise National Insurance or income tax. However, Boris Johnson argues that the increase is now necessary because of the unforeseen burden placed on the NHS by the coronavirus pandemic.

What is social care?

The government expect the new changes to raise at least £12bn a year. The money will at first go towards relieving the NHS of their backlog. Then over the next three years, a portion of this will move into paying for social care.

The social care system mostly helps elderly people, and those with disabilities and high care needs. It helps them with daily tasks, such as eating, washing, dressing and taking medication.

At the moment in England, people only have their care paid for by their local council if they are considered as very highly in need, and don’t have more than £23,250 in savings and assets. the amount to pay reduces until you have below £14,250, at which point the council pays for care if you qualify for it.

From 23 October, people in England will have a cap of paying £86,000 on care costs. This applies only to the costs of actual care though, and does not include accommodation or food. However, the state will fully cover the costs of care for anyone whose savings and assets are worth less than £20,000. Those with £20,000 to £100,000 in assets will have subsidised care costs.

The care system is under huge amounts of pressure due to an ageing population and the impacts of the pandemic. It is hit by reduced government spend and shortages of staff. In turn, this puts pressure on the NHs, as people cannot leave hospital without somewhere suitable to go.

Thank you for reading Health and Social Care Tax: How will it affect me?

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