As the future remains uncertain in the face of the coronavirus, the government is still trying to push forward with recovery efforts. In order to fund the social care the UK public so desperately needs, Chancellor Rishi Sunak has proposed various tax-raising options that will also fund long-term reforms.
This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice.
Sustainable funding for social care
The chancellor and PM Boris Johnson still need to come to an agreement before any reforms can move forward, though. Sunak has insisted that any kind of long-term solution to revitalise England’s social care system will require “sustainable funding” and it’s taking some time for Johnson to come around to the idea of raising taxes.
There might be little else that can be done to replace the £10bn in additional taxation that has been suggested, but because it would hit middle income families the hardest, the prime minister is reluctant to give the proposal a green light.
What’s the short-term view?
In the short-term, the Treasury has been discussing a levy that could provide funds for the recovery effort for the NHS in the meantime and put off a more robust social care provision later on once things have levelled out.
But the chancellor and health secretary, Sajid Javid, remain adamant that there needs to be an element of stability to social care funding and the best way to pay for all the work that needs to be done is higher taxes.
The government might look back a few decades to the popular 1% rise in national insurance on employer and employee rates as inspiration for a solution to the current problem. This is just one of many potential solutions being discussed, but unfortunately in all of them middle-income people will end up paying more.
Looking longer term
It’s possible any other decisions regarding taxation won’t be announced until the 2022 Spring Budget as opposed to an autumn announcement because of the uncertainty still surrounding the economy’s recovery and the persistence of COVID-19.
Check back for more updates and announcements concerning the UK economy and get in touch with us to review your financial plans to see how you might be affected by any tax changes.
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