HomeOwners Alliance logo

Sign up to our newsletter for the latest property news, tips & money saving offers

  • Looking to buy a new home? Start here

Social care reforms explained

The government is committed to it's plan to reform social care. This includes introducing a cap on the care costs you pay and safeguarding more of your assets, by raising additional funding in the form of a new tax, the Health and Social Care Levy. Read on for the social care reforms explained including what this means for you.

social care reform

Why do we need social care reform?

When we talk about adult social care, we are referring to the day-to-day support people need because of old age, becoming ill or having a disability. This might require them to stay in a care home or have help at home. With an ageing population, the NHS under financial strain and the social care sector struggling with staff shortages, the availability and level of care is currently in crisis. There is clearly a need for social care reform.

Unlike NHS healthcare, social care is not free at the point of use. Council funding is only available to those with the lowest means. But funds are limited. As a result, most social care is paid for by the individual or relatives of an individual needing care.

independent financial advisor service

In 2011, the Dilnot commission estimated that one in 10 adults aged 65 were likely to spend more than £100,000 on care during their lifetime. The government now estimates that one in seven will be faced with a similar bill. As a result, many people are forced to sell their homes to pay for care.

What changes can I expect from the social care reforms 2022?

From October 2023:

  • no one will pay more than £86,000 in care costs over their lifetime
  • anyone with less than £20,000 of assets won’t have to pay anything towards their care from their assets
  • if you have between £20,000 – £100,000 in assets you will be eligible for some means-tested financial support on a sliding scale. This new upper limit of £100,000 (as opposed to the current limit of £23,250) means more people will be eligible for state support.
  • Persistent unfairness in the system which means people who fund their own care are usually charged higher fees by providers will also be addressed by government.

How will a cap on lifetime costs of care work?

In practise, someone in need of care support will have to approach their local authority for an assessment. The local authority will deem what level of care is necessary to meet their needs and will pay accordingly once the £86,000 cap has been reached by the individual.

For those going into a care home, the Treasury expect the cap will be reached after 3 years of paying privately, at which point local authority funding will kick in.

Will I still have to sell my home to pay for care?

At the moment, if your financial assets (i.e. income, savings etc.) are below a certain threshold, you will qualify for help with your care costs. This is assessed via a means test. In England currently, people with assets under £23,250 are entitled to the maximum care fees support available from their local authority.

Under the means test from 2023, if you live in your own home, you will get all your social care funded if you have less than £20,000 in assets — excluding the value of your home. You will receive partial funding if you have assets worth up to £100,000.

Under the new system, if you move into a care home, the value of your property will be included, as is the case with the current means test. In this scenario, some people might need to sell their homes to fund their care.

However, it doesn’t have to be the case and with careful planning, you can explore options to avoid having to sell up. Whether it’s for yourself, or your parents, equip yourself with the facts. Read our guide on How to avoid selling your home to pay for care

When will these social care reforms start?

There are more details still to come from Government. The new means test and cap on care costs will only apply for those starting care in England from October 2023.

How will the government pay for social care reforms? With a tax rise in your national insurance contributions.

From April 2022, national insurance and dividend taxes will increase by 1.25p. This means that somebody earning a salary of £20,000 will pay an extra £130 per year of tax.

Then, from 2023, National Insurance will go back to its usual rate while the extra money will be collected by the new Health and Social Care Levy.

The current rules mean that anyone earning between £9,564 and £50,268 pays 12% of their earnings in National Insurance tax. Anyone who earns a salary between these amounts will be eligible to pay both the initial National Insurance rise in 2022, and then the new Health and Social Care Levy from 2023.

If you’re eligible to pay this additional tax, it’s a good time to plan ahead now and make sure you’re not hit by any nasty surprises when this new tax kicks in. Speaking to an Independent Financial Adviser (IFA) who knows your priorities will help you understand how this new tax will affect you.

Find a local independent financial adviser through our partners at unbiased. Click the button below and complete a short form to be connected with local advisers 

independent financial advisor service

Why is there criticism of the health and social care levy?

As mentioned above, anybody who earns an income between £9,564 and £50,268 will be in line to pay this additional tax. If you earn above this upper threshold, you will pay an additional 2%. In practice, this means that the more you earn, the less you will start to pay in National Insurance, as the amount you pay will start to take up a proportionally smaller amount of your monthly income.

Those at the lower end of the pay scale, such as young people and lower earners, will have to pay the fixed amount, leading some critics of the tax to say that the tax burden will affect these groups more. However, as health and social care are services that we all need, there is also an argument for saying that everybody should contribute towards these services.

How will social care reforms affect Scotland, Wales and Northern Ireland?

The new health and social care levy will apply across the UK, with funding distributed among the four nations. However, the £86,000 cap will only apply to England.

It’s important to understand your potential care costs and what it will mean for you in the future. Getting the right financial advice for your circumstances is key, so find your perfect financial adviser now.

Find a local independent financial adviser through our partners at unbiased. Click the button below and complete a short form to be connected with local advisers 

independent financial advisor service

Notify of
1 Comment
Oldest Most Voted
Inline Feedbacks
View all comments
close popup ×

Before   you go...

If you found this website useful, could you spare a minute to leave us a review?