The New Health & Social Care Levy

A new health and social care tax will be introduced across the UK to pay for reforms to the care sector and NHS funding in England.

A social care package, which the prime minister has called “the biggest catch-up programme” in the NHS’s history, will be funded through a new, UK wide 1.25% health and social care levy from April 2022.

From April 2022, NI Contributions will rise 1.25% across the UK. For someone earning £20,000 this is an extra £130 per year in taxes and for someone earning £50,000 this is an extra £505. The tax will begin as a 1.25% rise in National Insurance (NI) from April 2022 paid by both employers and workers, and will then become a separate tax on earned income from 2023 – calculated in the same way as NI and appearing on an employee’s payslip.

Income from share dividends – earned by those who own shares in companies – will also see a 1.25% tax increase.

It is expected that these increases will raise £36bn for frontline services in the next three years.

The prime minister said the proceeds from these rises would lead to £12bn a year going into catching up on the backlog in the NHS created by Covid, increasing hospital capacity for nine million more appointments, scans and operations.

The money will also go towards changes to the social care system, where a cap will be introduced on care costs from October 2023 of £86,000 over a person’s lifetime.

All people with assets worth less than £20,000 will then have their care fully covered by the state, and those who have between £20,000 and £100,000 in assets will see their care costs subsidised.

A hike in National Insurance will pay for a pledge made when Mr Johnson became prime minister in 2019 to “fix the broken care system”. However, this means he will be breaking his promise to not raise taxes, which has angered Tory backbenchers.

In summary

  • NI Contributions to rise 1.25% from April 2022 (UK wide)
  • Tax on share dividends to rise 1.25% (UK wide)
  • A cap will be introduced on care costs from October 2023 of £86,000 over a person’s lifetime. (England)
  • People with assets worth less than £20,000 will then have their care fully covered by the state. (England)
  • People with assets worth between £20,000 and £100,000 in assets will see their care costs subsidised.