We are still awaiting final details, which we expect to hear more about in the Autumn Budget on 27th October, however as we know from the announcement from the Prime Minister earlier this month, the rate of National Insurance Contributions (NIC) will increase by 1.25% from April 2022.
This will apply to both employees and employers’ contributions, but not to flat rate self-employed or Voluntary NIC rates. The increase to NIC is for one year only, before the introduction of the Health and Social Care Levy (HSCL) in April 2023. When the HSCL is introduced, NIC will then be reduced back to current levels (as far as we know). HSCL will be at the same rate of 1.25% but will also be payable by employees over State Pension Age; note this applies to earnings, not pension income.
In addition, dividend tax rates will also increase by 1.25%; the £2,000 dividend allowance will still be available, but tax on dividends over this amount will increase to 8.75% for Basic Rate tax payers and 33.75% for Higher Rate and 29.35% for Additional Rate tax payers, which is still less of course, than income tax rates that apply to earnings.
This additional income will fund a revised scheme for those entering care from October 2023. The care fees “asset” cap will increase from £23,250 to £100,000. Where assets are between £20,000 and £100,000, local authorities may fund some care costs; for anyone with assets less than £20,000, they may still be required to contribute to care costs from income. However, no one will pay more than £86,000 for care. But this cap only applies to personal care costs (dressing, washing and eating), not residential and is based on the costs Local Authorities will contribute, which is not necessarily the same as that charged by the care home provider.
More details will be provided as and when available.