Editor’s Column: A new social care or a tax nightmare? 

It’s easy to condemn the changes, and many have, but I believe there may be some positive aspect to the changes which experts will no doubt be wrangling over for years to come.

I will not go into the changes in detail, they are covered in our story here and have been well reported.

The questions now are really where do we go from here, what will the impact be on Financial Planning and will there be a sting in the tail? 

I’ll leave the speculation to others but let’s look first at the positive aspects of the changes.

Most importantly, if the £86,000 lifetime cap on social care costs works and is genuine (and I’m slightly concerned about the cap mainly applying to care costs and excluding accommodation and food) then it is, in many respects, a positive step for millions.

The cap should mean it will be far less likely that people will routinely have to sell off their parent’s home when their mum or dad have to go permanently into long term care. I know several families who have suffered this fate and they shrug their shoulders when they talk about it but it is a deeply upsetting experience for many and we should not forget that.

In future, families should be more likely to retain the family home and inheritances may well increase as a result, a boon for Financial Planners and, of course, the hard working individuals who saved up and bought their homes in the first place.

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So far so good and the Government deserves credit for finally grappling, at least in part, with the dreadful political problem of how to pay for long term care.

Many will say that relatively modest rises in National Insurance and dividend tax are a small price to pay for solving this thorny problem and reducing financial anxiety for families whose loved ones need to go into care.

The but, and it’s a big but, is that once you dig beneath the surface there is a lot more going on with these changes. In fact, the lion’s share of the billions raised through the extra taxation is actually going to fund the bottomless pit known as the NHS. I am a big fan of the NHS and it is one of the things I am proudest about when it comes to UK plc but it burns through cash like Imelda Marcos went through shoes.

The real problems is funding the NHS and this has not been resolved.

The other issue, which few have picked up on, is that many of us are already paying for social care through the social care precept which many local authorities (including mine) already levy on council tax. In effect the new Social Care Levy announced by the Prime Minister this week is double taxation as we will be paying both extra council tax and extra NI for, more or less, the same thing.

So the changes are the classic ‘curate’s egg’ – good in parts. I will not condemn the attempt to sort out the mess that is Social Care funding but I do fear that this is the thin end of the wedge and there is more taxation to come. Working pensioners who do not yet pay National Insurance should be particularly concerned and, as ever, good financial advice will be more valuable than ever.

For Financial Planners there will be a rising need for their services and, potentially, rising levels of inheritance as more family homes are passed on. 

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