The funding will come from a new tax of 1.25%, the Health and Social Care Levy, which will be introduced in April 2023. In the meantime, however, National Insurance has increased by 1.25% for one year from April 2022. This will revert to 2020/2021 levels on 6 April 2023 and the levy will become a separate new tax of 1.25%. The increase in National Insurance and the new tax applies to employers, employees and the self-employed and there has been an equivalent increase in tax on dividends.
The new cap on the cost of adult social care. What does it mean?
At present, there is no cap on the cost of adult social care. This can mean that a person has to use all their savings and perhaps even sell their home to pay for their care.
A new cap on the cost of social care will be introduced in October 2023 and, whilst social care is rarely free and will still have to be paid for under the new regime, the cost of long-term care will have a lifetime cap of £86,000 per person. This relates to the cost of personal care only (nursing and assistance for example), which will be different for each person, depending on local authority assessment of individual needs. It does not include daily living costs, such as accommodation, utility bills and food.
The new cap will cover those who reside in a care home and those who receive care in their own home.
According to Age UK, the estimated cost of residential care in UK averages £600 per week per person and nursing home costs average £800 per week per person.
Care at home costs depend upon where you live and are likely to be between £17 and £30 per hour.
The new asset threshold – what will you have to pay?
Currently, in England, if you have assets of more than £23,250 (the upper asset threshold), you will have to pay the full cost of your care (self-fund). If you have less than £14,250 (the lower asset threshold) in assets, you will not pay for your personal care. You will make a contribution based on the value of your assets if they fall between these two thresholds.
From October 2023, when the new system is implemented, the new upper asset threshold will be £100,000. So, if your assets are worth more than this you will have to self-fund your care. The lower threshold will be £20,000, so if you have less than this in assets you will not pay for your personal care at all. Again, if you have assets valued between these two thresholds, you will have to make some contribution to the cost of your care.
Your home may be included within your assets, and it may be necessary to sell it. However, there are ways in which this can be avoided or delayed. For example, the value of your home may not be counted at all if someone of relevance still lives in it. This includes:
- a partner or former partner, unless estranged
- an estranged or divorced partner if they are a lone parent
- a relative over 60 years old
- a child who is under 18
- a disabled relative
If you need to continue to live in your home, the value of your home will be disregarded from your assets.
If you need to go into a care home on a short-term or temporary basis only, your home will not be included in your assets.
If your home is included in your capital assessment, care home charges may be deferred until it has been sold, which may be when you die.
Read Age UK’s Factsheet 10, ‘Paying for permanent residential care’ for further guidance on paying for your care and selling your home.
The ‘care account’
From October 2023, if you receive care, your local authority will open a ‘care account’ for you. Any care costs you incur will begin to accumulate from that date – previous costs will not be included. This is the case whether you receive care at home or in a residential care home. When the personal care component of your costs hits £86,000, you will stop paying for personal care and it will be funded from that date. After that, you will only pay for the daily living costs.
For the purpose of calculating the amount you have paid for your care, the daily living cost element has been set at a national, notional amount of £200 (2021/2022). This will be deducted from the whole amount you have paid so that only the personal care element is added to your care account.
You may choose to top up your care costs by paying the difference between a more expensive service and that which the local authority has assessed as being necessary. For example, you may choose to stay in a more expensive residential care home. If you decide to do this, the amount you top up will not count toward your care account.
Is it possible to protect your family assets from care costs?
You can help to protect your assets by taking careful advice about financial and future planning. For example, to avoid any gifts you make being classed as ‘deprivation of assets’ (intentionally reducing your assets so that they are not included in any local authority assessment for care home fees), make sure that they comply with the rules.
Ask our private client experts for advice on making a will, so that everyone knows exactly what should happen when you die, and how you can leave your assets in trust. You can also get advice on setting up a power of attorney so that if the need comes, your attorneys can act straight away, rather than having to apply to the Court of Protection, which will certainly slow things down.
Read Build Back Better – the government’s plan for health and social care.
Read the government’s policy paper on adult social care charging reform.
Author: Anne Rogers, partner and head of Graysons’ private client team.