The Health and Social Care Levy


11th November 2021

What does the new Health and Social Care Levy Act mean for the UK and who will it support? Our health and social care experts take a look.

A new tax to support health and social care

On the 20 October 2021 the Health and Social Care Levy Bill 2021-22 was given Royal Assent and has now become the Health and Social Care Levy Act 2021 (the Act).

The Act will legislate to provide a new tax to assist in funding health and social care across the UK.

Once the tax is imposed in the next tax year (April 2022), the UK Government will aim to raise £12 billion a year for the next three years to pay for its proposed reform to health and social care.

The funds from the tax will be ‘legally ring-fenced’ to invest solely towards health and social care as set out in the UK Government’s policy paper, ‘Build Back Better: Our plan for health and social care’.

The tax

The new tax that the Act imposes is to be called the Health and Social Care Levy (the Levy). However, for the first year (tax year beginning April 2022) the tax will be collected by a 1.25 percentage point rise, in National Insurance contributions (NICs).

The tax will apply to anyone who is liable to pay a qualifying national insurance contribution, or would be liable, if the pension age restriction provisions are ignored, to pay such a contribution.

Following this, from April 2023 the Levy will become legislatively separate from NICs.

HM Treasury has published, Impact of “Building Back Better: Our Plan for Health and Social Care” on households and an impact assessment of the Bill: Health and Social Care Levy, has been published by HM Revenue & Customs.

What the tax will support

The UK Government proposes to place a cap on adult social care costs in England, stating it will be a ‘seismic change’ to the way care is paid for. Currently, anyone in England with assets over £23,250 must pay for their care in full; a rule the government wish to change.

A cap on care costs and an increased upper capital limit were central recommendations of the 2011 Dilnot Commission and a cap was legislated for in the Care Act 2014 (the Care Act). However, the details of the proposed cap differ from those set out by the Commission.

Sections 14 and 17 of the Care Act provide a unified legal framework for the charging of care and assistance. When a local authority is arranging to fulfil a person’s care and support requirements, it can determine whether or not to charge them for the care on review of a submitted financial assessment (means test).

The proposed reforms provided in the UK Government’s policy paper, Build Back Better: Our plan for health and social care (the Policy Paper) includes:

  • The introduction of a cap on personal care costs of £86,000 from October 2023.
  • Increasing the upper capital limit (the threshold above which somebody is not eligible for local authority support towards their social care costs) from £23,250 to £100,000 from October 2023.
  • Increasing the lower capital limit (the threshold below which somebody does not have to make a contribution towards their care costs from their capital) from £14,250 to £20,000.
  • If somebody has capital between £20,000 and £100,000 the local authority may fund some of their care, but they may have to contribute up to 20% of their chargeable assets per year (in addition to their income).
  • Increasing the amount of income that care recipients can retain after contributing towards their care costs (the Minimum Income Guarantee and the Personal Expenses Allowance) in line with inflation from April 2022.

The implementation of the above will be at the discretion of the local authority. Therefore, the cap will only cover the costs of a care home or the costs of care at home, which the local authority, not the individual deem suitable.

Wider reform

Additionally, the Policy Paper also sets out proposals for wider system reform, including the integration of health and social care, further details on which will be set out in a White Paper published later in the year. This includes at least £500 million of funding over the next three years to support the social care workforce.

This article has been co-written by Miles Murphy and Eve Piffaretti.

For more information about these proposed reforms, please contact Eve Piffaretti.

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