Should you pay extra tax to pay for your care?

We are all getting older, and statistically, we are living longer. This good news comes with a sting in the tail. More of us living longer means more of us will need care in our old age.
The NHS and local authorities which operate care homes are already struggling to cope with the demand. There is currently a £2.5bn funding gap, and it is getting deeper and wider every year.
MPs are considering a radical solution.

Over 40s could face a new tax to cover social care

A new cross-party report has been prepared by the housing, communities and local government, and health and social care committees. It describes the current social care system as unsustainable and not fit to respond to the demographic trends of the future. The committees say that help with washing, dressing and eating, should be free to everyone who needs it. Accommodation should continue to be paid for on a means-tested basis. This will all mean extra cost. The question is where this money should come from.

“The social care system is in a critical condition and there is an urgent need for more funding both now and in the future to ensure people are properly looked after.”

Clive Betts MP, chair of the housing, communities and local government committee.

There is little spare cash in the treasury, and any that is available is likely to go to supporting the NHS. A new source of funding is required urgently, and the MPs called for the introduction of a ‘Social Care Premium’.

How would this work?

The report recommends a Social Care Premium either as an additional element of National Insurance or as direct additional tax paid into dedicated not-for-profit social insurance fund. This would be ringfenced and used only for the provision of social care.

To ensure fairness between the generations, the additional payment should be paid by those aged over 40. A minimum earnings threshold should be set to protect people on lower incomes, but pensions and investments should be included in calculations.

Individuals and employers should pay a new contribution into a dedicated fund. This would provide funding at both a local and national level with the long-term aim of providing social care for the elderly free at the point of delivery.

How will people react?

MPs are of course under no illusion about how most people will respond to the threat of a hike in demands from HMRC on their 40th birthday.

They counter by pointing out that finding a fair and sustainable settlement for social care has become essential, and that too many people are already being left without the care and support they need.

The hope is that taxpayers will recognise that there is no alternative to paying more.

The committee believes people might be willing to pay more if there was an absolute guarantee that the extra money would go on social care.  They hope that a dedicated fund will help gain public trust and acceptance for the measure, although it has to be said that previous governments have a less that perfect record in keeping funds in the pots they were intended for.

Planning for your own future

Whether or not the proposals come into force, the report does highlight the need to plan ahead for our own care. To discuss how you could afford care you might depend on in the future, talk to us at Continuum today.

Book a free initial consultation

Book an initial consultation with one of our independent financial advisers or call us on 0345 643 0770 if you would like to discuss further.

Sources:

yourmoney.com – Over 40s should pay new tax to cover social care costs, say MPs – 27th June 2018

bbc.co.uk – Tax over-40s for old age care, say MPs – 27th June 2018

parliament.uk – MPs Call for Social Care Premium to fund personal care for all – 27th June 2018

Let's talk

If you want to get a free consultation without any obligations, fill in the form below and we'll get in touch with you.









    Sign-up to our free weekly online publication