The latest announcements about National Insurance rises by the UK government have sent some into a panic because of the financial strain many are already feeling.

The Health and Social Care Tax are necessary because there is a shortfall in the coffers where social care is concerned, and the issue needs to be addressed. This is why the additional tax fund has been announced for social care in England and to help bolster the NHS recovery from the Covid-19 pandemic. 

Any tax rise always faces some form of opposition; however, it also comes from inside the Conservative Party because some members believe it will unjustly impact those on lower incomes and the younger populations.

Jürg Widmer Probst is here to help explain how the UK government changes could impact you when they come in and what they are all about.

What is the NI rise about? 

The employed via their wages, employers via staff contributions and self-employed on their profits will all pay an additional £1.25 of National Insurance as of April 2022.  

There is then a twist in April 2023. The standard NI contributions will kick back in at their regular rate, and the extra tax will instead be collected as a new levy. The Health and Social Care Levy will then also be paid by state pensioners who still work.

How much will these changes in tax cost?

An employee on a salary of £20,000 per annum should expect to pay an additional £130 per year. Those who earn under £9,564 do not have to pay NI contributions, nor will they pay towards the new levy.

Why are this tax increase and levy happening?

The social care system has been underfunded and struggling even before the pandemic hit but even more so now. The NHS is also in the same position, and therefore, the government was looking for ways to bolster its funding.

The changes are expected to bring in a further £12 billion, which has been said will initially be directed toward the NHS and not the care system. It is likely that a portion of the funds will then be relocated toward the social care system over 3 years.

Those with equity, savings or investments of less than £20,000 will have their care fully funded by the UK government. Those who have between £20,000 and £100,000 will have their care costs subsidised.

Why is this National Insurance rise receiving criticism? 

The main reason for this contention is because the current Conservative Government is going back on the promise they made in their 2019 manifesto, which stated they ‘would not raise NI’.

There is a view that this move robs from the poor to give to the poor because it will largely impact those on a salary of between £9,564 and £50,268 who pay 12% NI. Those who earn over this are only liable to pay 2%, and the NI contribution becomes a smaller portion of the wage. This will also apply to the Health and Social Care Levy, which is why it is such a bone of contention.

How is the rest of the UK currently structured?

In Scotland, those with assets or savings of less than £18,000 receive a free care home place. They also provide free personal care at home for those eligible regardless of age. Anyone with savings of over £18,000 and up to £28,750 must part-fund their care. Those with more than that have to fund their own care but will receive a £193.50 a week contribution towards personal care and £87.10 a week towards nursing care.

In Wales, everyone who is eligible pays no more than £100 per week for a place in a care home.

While in Northern Ireland, everyone over the age of 75 receives home care support.

There is no doubt that the National Insurance rise will have a challenging impact on many. It will undoubtedly benefit many of the aging population and others who experience a greater need for care and NHS support.