Social Care Reform
Yesterday, PM Boris Johnson made an announcement introducing his big plans to reform the social care system.
Rise in National Insurance
In April 2022 National Insurance contributions will increase by 1.25%. This increase will help to generate £36 billion in funds over 3 years.
These funds are to be spent as follows;
- NHS funding – £16 billion
- COVID health response – £8.9 billion
- Social care & training – £5.4 billion
- Devolved nations health and social care – £5.7 billion
The money that is going to the COVID health response is to help clear the 5.5 million long waiting list for people awaiting surgery.
What does the NI increase mean for you?
|NIC after 1.25% increase||Increase in annual NIC||NIC as a % of income (after increase)|
The table shows how much you can expect to start paying in NI from next year. Source: The guardian
Social care changes
The amount that people will need to earn before needing to pay for their own social care is going to be reduced to £20,000 in October 2023. For those with an income between £20,000 and £100,000 will receive some state help towards the cost of social care.
There will be a cap on spending on the cost of care at £86,000.
Rise in dividend tax
Boris also announced that there would be a rise in dividend tax by 1.25% at the same time. After a hard year for business owners, this will seem to some as an extra kick in the teeth.
It is important that you discuss with your accountant the most tax efficient way to pay yourself as a director from April 2022.
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