Paying for social care costs

National Insurance Contributions (NICs) and dividend tax rates rise 1.25% in 2022 to fund a new health and social care package.

The increase is put on a permanent footing from 6 April 2023, as a separate tax, the Health and Social Care Levy. NIC rates then revert to current levels. Workers over state pension age, who are currently exempt from NICs, will be liable to the Levy - but not the temporary increase in NICs.

From 6 April 2022, NICs rise by 1.25% for employees (Class 1 contributions), the self-employed (Class 4 contributions) and employers (Class 1, 1A and 1B secondary contributions). Also from April 2022, dividend rates rise to 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers. These measures apply to all the UK, and have particular impact on higher earners in Scotland.

The proposals bring major change to the way social care is funded in England. They mean that from October 2023, no eligible person starting adult social care should contribute more than £86,000 over their lifetime. Where assets are less than £20,000, contributions may be required from income, but not savings or the value of the home. Means-tested support will be available where assets fall between £20,000 and £100,000. Social care is funded differently elsewhere in the UK.

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