How will the new social care system in England work?

The Health and Social Care Levy Bill 2021-22 was introduced on 8 September 2021. [1] It will increase income tax and national insurance contributions (NIC) to raise an additional GBP11.4 billion to reform the funding of long-term health and social care over the next three years. The additional funding, which is being introduced as a new tax, is called the Health and Social Care Levy and will apply to the whole of the UK.

The policy will implement a cap of GBP86,000 on an individual’s lifetime care costs in England and raise the means-testing threshold for state contributions to the cost of care to GBP100,000. The GBP86,000 cap applies to personal care costs, rather than accommodation, in England and does not apply to Scotland, Wales and Northern Ireland, which have separate care regimes. This distinction between care costs and accommodation is new, and therefore not something that care homes have previously needed to include in their billing structures. It is not yet clear what impact this change will have.

The tax implementation
From April 2022, there will be a temporary 1.25 per cent increase to both the main and additional rates of Class 1, Class 1A, Class 1B and Class 4 NICs for the 2022/23 tax year. Revenue raised will go directly to support the NHS and equivalent bodies across the UK.

From April 2023 onwards, the NIC rates will decrease back to 2021/22 tax year levels and be replaced by a new 1.25 per cent Health and Social Care Levy where the revenue will be ring-fenced to support UK health and social care bodies. From 2023, people over the state pension age will also be included in paying the Levy.

From April 2022, all rates of UK dividend tax will increase by 1.25 per cent. This change will be scored at the Budget and legislated for in the next Finance Bill.

The current system
At its stands at present an individual’s assets will be assessed by the local council to decide how much they should contribute towards their own care. This assessment is also known as the means test. The current situation is as follows:
• If you have more than GBP23,250, you have to fund your own care and there is no limit to how much you might need to pay during your lifetime.
• If you have between GBP14,250 and GBP23,250, your local council will contribute towards your care (until your assets are reduced to GBP14,250).
• If you have less than GBP14,250, your care will be fully funded.

The new system
• From October 2023 if you have assets worth less than GBP20,000 your local council will have to cover all of your care costs.
• If you have assets between GBP20,000 and GBP100,000 you will be expected to contribute to the cost of care, but will also be eligible for state support covering some of the costs. This support will be means tested.
• You will not have to pay more than GBP86,000 for care in your lifetime, which the government has stated is roughly equivalent to three years of care.

The new system intends that no one will have to pay more than GBP86,000 for care in their lifetime, which is progressive and certainly an improvement on the existing system. However, it will not help to tackle some of the existing shortfalls in care needs. There are also doubts about whether this level of funding will sufficiently cover the cost of care over three years particularly in parts of the country where it is significantly more expensive and any deficit in fees will probably need to be topped up.

Improvements
The new policy has the potential to help people plan for their old age with more confidence. Limiting the lifetime contribution to care also means that some clients will be able to make provision for their children and family members with more certainty. In addition, the system will become fairer because people who pay for their own care will not have to pay more than a state funded individual for the same level of care. Historically, local councils have had different policies and procedures in place when it comes to assessing and providing care, which can cause financial distress and confusion. As the new system is developed, it would be helpful if national government could provide local councils with clearer and more consistent procedures to enhance the transparency of the universal care system.

Exploitation
There is always concern that individuals can be exploited when it comes to planning ahead for care costs since it is such an emotive and financially burdensome milestone in someone’s life. Unfortunately, some unscrupulous providers in the market promise clients that by setting up a trust they can exclude assets from means testing for care fees. This is not acceptable practice and breaches STEP’s Code of Professional Conduct.

If a local authority suspects that there has been a deliberate ‘deprivation of assets’ to avoid care fees then it may pursue penalties, insolvency proceedings, county court judgements and sometimes a criminal record. We hope that the intended new plans will provide sufficient clarity and transparency so that people no longer feel that they have to go to these desperate, and potentially criminal, lengths to secure their future in care or to avoid paying for it. More client information on this is available on our public-facing website here.

The government has mentioned in its proposals that it intends to encourage insurance companies to implement new products to help finance future social care costs, which could be valuable for families and practitioners in the estate planning process. We await further details from the government on all of these proposals and will provide updates on any developments.

Emily Deane TEP, STEP Technical Counsel

[1] https://www.gov.uk/government/publications/health-andsocial-care-levy/health-and-social-care-l

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