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People aged over 40 should pay a social care premium – tax for care fees

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Two parliamentary committees have put forward plans for people over 40 to pay a social care premium which will be used to pay for social care. The MPs’ committees say that the money should be paid into a ring-fenced fund. How would it work?

Why is a social care premium needed?

At the moment, if you need medical care (care from the NHS) you don’t have to pay for it. Even if you need care for many years. However, if you need what’s called ‘personal care’ or social care, such as help with dressing, washing and eating, it’s means tested. That means that you have to pay for it yourself unless you only have a modest amount of savings or capital.

Contrary to popular belief, this has always been the case. What’s different is that many more older people need social care due to the increase in illnesses such as dementia. If you don’t have much by way of savings or capital (generally below around £14,000) the local authority will pay towards your care. However, it will take any pension and other income you have and put this towards your care.

If you have more than this, or if you own your own home and you live there on your own, the value of your home is taken into account. If you need round the clock care or you have to go into a care home, and you don’t get any local authority financial help, you could end up paying hundreds of thousands of pounds.

Local authorities have had their government funding reduced by up to 40%, so many are cutting the amount of social care they provide. The report says that between £2 billion and £2.5 billion is needed before 2020 to fund social care properly.

It wants everyone to be able to have free access to the social care they need, although this wouldn’t be available instantly, even if the extra tax was introduced.

What’s being proposed?

The idea is that people over the age of 40 will have to pay an extra tax called a social care premium. It would either be as an extra National Insurance payment or as a separate payment made to an independent fund. Other countries, such as Germany, have independent funds that raise money purely for the cost of social care.

There’s no indication yet of how much this premium might be if it was to be introduced. The report by the MPs’ committees has just recommended that it should be looked at.

If the Social Care Premium were to be introduced, money raised from this payment would be paid into a standalone fund. It would only be able to be used to pay for social care. The committees recommend that it would have to publish accounts regularly to show where and how the money has been spent.

Who would have to pay

Under the parliamentary committees’ plans, people aged over 40 would have to pay the extra tax. If you’re on a very low income you would be exempt from paying it. Your employer would also have to contribute (in the same way that they have to pay into a pension for you).

If you’re over the age of 65, you’d still be expected to pay the social care tax, even if you’re no longer working. The report says that this is because many older people have benefited from rising house prices.

Related articles: 

Care home funding; who pays if your parent or elderly relative needs to go into a care home?

Getting National Insurance credits for your state pension if you’re a carer

Managing someone else’s money – advice for family and carers

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