Save, make, understand money


Over-40s could pay higher tax to fix social care crisis

Emma Lunn
Written By:
Emma Lunn

Health secretary Matt Hancock is keen for people aged 40 and over to pay higher taxes to cover the cost of care in later life.

The controversial plans aim to end the social care crisis, according to a report in The Guardian.

Under the scheme, over-40s would pay more tax or National Insurance, or be forced to insure themselves against hefty bills for care when they are older.

The money raised would be used to pay for care homes or helping elderly people in their own homes.

Unlike the NHS, social care is not free at the point of delivery. Older people with assets have to pay for their own care. Many people who are deemed too wealthy to qualify for local council-funded care are forced to sell their homes to pay care home costs.

According to The Guardian, the over-40s tax plans are being examined by Boris Johnson’s new health and social care taskforce and the Department of Health and Social Care (DHSC). Johnson pledged last year “fix the crisis in social care once and for all”.

Similar schemes to the one proposed are in operation in both Japan and Germany.

In Japan everyone starts contributing once they reach 40. In Germany 1.5% of every person’s salary, and a further 1.5% from employers or pension funds, are ringfenced to pay for care in later life.

Steven Cameron, pensions director at Aegon, said: “The Covid-19 pandemic has made it even more imperative that we solve the social care funding crisis. Finding a fair and sustainable solution will inevitably involve a sharing of costs between the state and individuals, based on their wealth or income.

“Introducing an additional band of income tax or National Insurance ringfenced to go towards social care costs is worth exploring and would mean those on higher earnings pay more into the fund.”

But Cameron raised the point that applying the new tax to those aged 40 and over may raise questions over intergenerational fairness, and suggested the government needs to look at the wider support it is offering for each age group.

“While paying more tax is not going to appeal to everyone, homeowners might see it as a price well worth paying if it came with a cross-party lifelong guarantee that in return they will not have to sell their home to pay for future social care,” he added.