Social Care Tax Hike: Price of a Pint a Week to Inherit Mum and Dad's House?

© REUTERS / POOLBritain's PM, Health Minister and Chancellor of the Exchequer visit Westport Care Home in London
Britain's PM, Health Minister and Chancellor of the Exchequer visit Westport Care Home in London - Sputnik International, 1920, 07.09.2021
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PM Boris Johnson's social care plan has proven unpopular with his own Conservative backbench MPs for breaking a manifesto pledge not to raise National Insurance — a tax burden borne by employers more than employees.
With the British government hiking social security tax to fund elderly care, how much more will Britons have to pay?
The policy, yet to be approved by Parliament, keeps an election promise to address the issue of pensioners having to spend their life savings and the equity on their homes on care costs — often around £1,000 a week in a nursing home — leaving nothing for their children to inherit.
Johnson justified the £12 billion per year tax-and spend plan by appealing to public pride in the National Health Service (NHS) during the COVID-19 pandemic and the need to clear a huge waiting list of diagnostic tests and non-urgent surgery stemming from that.
"You can’t fix the Covid backlogs without giving the NHS the money it needs," Johnson told Parliament. "You can’t fix the NHS without fixing social care, you can’t fix social care without removing the fear of losing everything to pay for it, and you can’t fix health and social care without long-term reform."
But many of his own Conservative backbenchers are unhappy about the 1.25 per cent rise in National Insurance (NI), the UK's social security tax charged which bosses pay more of than workers. The rise will also be charged on earnings from share dividends and on pension income.
Voters are roughly split on the issue according to a snap poll by YouGov, with 44 per cent in favour and 43 per cent against. But opinion is polarised along age and party lines, with over-65s and Conservative voters far more in favour of it — a no-brainer for Johnson and Chancellor of the Exchequer Rishi Sunak.

How Much Will You Pay?

Investments and pensions firm Hargreaves Lansdown did the sums to work out how hard the tax rise will hit Britons in their pockets.
For someone earning £30,000, close to the average UK salary this year, the extra contributions will be £255 per year — just under £5 per week, equivalent to a pint of beer in a big-city pub or two cups of coffee.
That would add up to £10,000 over a 40-year career — compared to the average market value of a home in Britain in March this year of over £250,000, up more than 10 per cent on 2020.
Britain's Prime Minister Boris Johnson arrives on the second day of the Global Education Summit in London, Britain July 29, 2021 - Sputnik International, 1920, 07.09.2021
Boris Johnson Breaks Election Promise About Not Raising Taxes to Pay for Elderly Care Reforms
Those on £20,000 a year will pay an extra £130 per year, and those earning just £10,000 will only pay 10p a week extra.
Moving up the pay scale, someone earning £40,000 a year would be charged £380 per year more, wile at the £50,000 per annum mark the rise equates to £505 more annually.

Progressive Taxation?

NI is a tax on earnings levied to pay for the NHS and many social security benefits, including the state pension. Like regular Income Tax, it is charged progressively with a lower threshold on contributions that exempts the lowest earners — but also an upper cap that limits how much the highly-paid have to contribute.
Those paid less than £184 per week — up to £9,564 per year — pay nothing into the NI pot, but all earnings from that step up to £50,284 per year are taxed at 12 per cent. The old upper cap on contributions has been replaced with a 2 per cent rate on income over £50,384 per year.
However, employers contributions are higher. Bosses currently have to start paying 13.8 per cent on all earnings over £170 a week with no upper cap.
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