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Tax Increases

The Government has confirmed there will be tax increases to cover the cost of social care and health care.

The Prime Minister’s plans to tackle the Covid backlog, reform adult social care, and to bring the health and social care system closer and more sustainable for the long term have been released.

£36 billion will be invested in the health and care system over the next three years. This will ensure it has the long term resource it needs.

From April 2022, the government will introduce a new, UK-wide 1.25 per cent Health and Social Care Levy. This will be based on National Insurance contributions (NICs) and from 2023 will be legislatively separate.

How will it work?

To ensure everyone contributes fairly, all working adults, including those over the state pension age, will pay the levy and the rates of dividend tax will also increase by 1.25%.

Every individual will contribute according to their means. Those who earn more pay more, with the highest earning 14 per cent of people paying around half the revenues.

Employers, who benefit from a healthy workforce and a tax-payer funded health service, will be asked to contribute ensuring costs are shared.

This will raise around £12 billion in extra funding per year. Which will be invested in frontline health and social care across the UK over the next three years.

Why do we need tax increases?

The pandemic put unprecedented pressure on the NHS. The number of patients waiting for elective surgery and routine treatment in England is now at a record high of 5.5 million. This could reach 13 million by the end of the year if left unchecked. Before the pandemic, nine out of ten were waiting fewer than 25 weeks in England. This has now risen to 44 weeks.

To fix this, the NHS needs to be able to offer more appointments, operations, and treatments. New, innovative practices must be pushed forward so patients receive the best possible care.

The new funding is expected to fund an extra 9 million checks, scans and operations. The NHS long term plan committed to increasing activity year on year. In recognition of pressures from Covid, this will now increase to 110% of the planned activity levels by 2023/24.

“We’re tackling the NHS backlog and taking decisive action to fix our broken social care system.

This significant £12bn-a-year long-term increase in public spending will improve people’s lives across the UK – but our health and social care systems cannot be rebuilt without difficult decisions.

The new Health and Social Care Levy is the necessary and responsible thing to do to protect the NHS, sharing the cost between businesses and individuals and ensuring those earning more pay more.”

Chancellor of the Exchequer Rishi Sunak

For further advice contact AJR & Co Ltd