PM announces 1.25% levy and dividend tax rise to fix social care

Addressing MPs in the House of Commons on Tuesday, Johnson said dividend rates would increase by the same amount as national insurance — 1.25 per cent — in order to fund the cost of care.

The tax increase has been rebranded as a health and social care levy following a backlash from MPs.

Pensioners in work will also have to pay the new levy, despite people being exempt from NI payments after reaching state pension age.

The prime minister also promised a cap on the cost paid by an individual for social care in their lifetime, which will be set at £86,000 for people entering care from October 2023. 

There will be a floor of £100,000 in assets, which means the government will step in to pay an individual’s social care bill beyond this cap.

Johnson said the government is working with the financial services industry to innovate, so people can insure themselves up to that value.

The prime minister said he accepted this broke the manifesto promise, but said it was not a decision made lightly, saying it was the “right, reasonable and fair approach”.

Currently, those with overall wealth of less than £23,250 are supported by the government for social care costs.

A cap on cost has been suggested for a while. It was first put on the table a decade ago by Sir Andrew Dilnot, and while legislation was passed to enable the government to cap the cost of care it was never implemented. 

In addition to social care funding, the government has also announced an extra £5.4bn over the next six months to help the NHS in England tackle backlogs worsened by the pandemic.

This included £1bn to help tackle the Covid-19 backlog, £2.8bn to cover related costs such as enhanced infection control measures to keep staff and patients safe from the virus, and £478m to continue the hospital discharge programme, freeing up beds.

This article originally appeared on FTAdviser.com