National Insurance Increase | Planning For Your Future
In September, the PM announced a 1.25% rise in National Insurance to pay for social care in England.
We’ve all seen the news, we’ve all heard how this planned rise in National Insurance in April 2022 will support the NHS backlog as a result of covid.
It’s estimated that over the next three years, it will raise £35 billion to be used exclusively on health and social care. In addition, the PM accepted this rise breaks the Tory manifesto pledge to not raise taxes but insisted it was necessary due to financial pressures from the pandemic. 1
The new levy will be paid by all earned income workers, including those above state pension age. It aims to cap the overall cost of care and to prevent those who need care from eating into their savings.
When this new system kicks in from October 2023, no one will have to pay more than £86,000 for care over their lifetime.
While it is promising to see efforts from the Government to address the UK social care issue. The increase in National Insurance does come with limitations and ultimately, the responsibility for care is still in the hands of us, as individuals.
As the UK social care industry continues to struggle, we do welcome these efforts but wish to encourage that more is required to raise awareness of the true costs of care, options for future planning and who is required to pay for it.
In particular, the planned increase in National Insurance should provide the sufficient extra funds needed for social care. But, it is not clear whether it will be able to cover the additional costs as a result of the pandemic.
“A recent report says the health service needs around an extra £10bn of revenue funding.” 1
So, as much as this is a promising start to tackle the social care issues, in particular where previous governments have avoided the issue. The fact remains that there is still not enough funding to entirely fix the social care and NHS system.
However, we have been provided with some clarity with the cap on the maximum future care costs an individual could face in their lifetime (£86,000). 1
What is National Insurance?
Introduced in 1911, National Insurance is a tax on salary earnings paid by employees and employers. Self-employed workers also have to pay. It was initially introduced to provide an essential fund for workers who needed medical treatment or have lost their job. 110 years later, it’s now used to fund the NHS, benefits and the state pension.
How much more will I have to pay?
Those earning around £30,000, can expect a rise of yearly payment of £255. Compared to those earning, £80,000, who can expect a rise of £880 a year.
Our care, our responsibility
The key note to take away from this is still, the majority of people in the UK requiring long-term social care will need to fund some or even all of it themselves.
The majority of the new tax will first go to the NHS rather than social care, with the demand only rising as people begin to hit the care spending cap. 1
Although a promising beginning, the reality is that more is still needed to reform the struggling care system in the UK. Leaving many of us in uncertainty regarding future funding needed.
If you’re looking to plan your finances for your future needs, we recommend putting a financial plan in place. We can have a friendly chat about your future hopes and dreams and help you set up a financial plan that’s right for you.
Call us now on 01423 368000 or email us at email@example.com
The bases and levels of taxation, and the reliefs from taxation can change at any time. They are usually dependent on individual circumstances.