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The government has dodged the social care funding question ever since Theresa May's 'death tax' almost derailed her election campaign in 2017 despite a U-turn. At a press conference on Monday, the prime minister did not say whether taxes and NICs would increase or not.
News reports now suggest the government is considering raising NICs by one point, to fund long-term care. NICs are paid by employees on earnings from £9,568 up, unlike income tax, which is only paid from £12,570. It would thus capture a larger number of employees while sparing pensioners, as those of state pension age are currently exempt from paying them.
Voters will make their own minds up
Selby pointed out that increasing NICs would make salary sacrifice pension contributions more attractive as they are relieved from national insurance and tax.
“The government may try to badge this as a ‘social care levy’ separate to national insurance contributions. This would, on the face of it at least, keep its pledge not to raise NI rates intact – although whether or not voters would see it that way remains to be seen," he speculated.
NICs for pensioners?
Sarah Coles, personal finance analyst at investment platform Hargreaves Lansdown, said a 1 point rise in NICs would generate an estimated £10bn for the exchequer, which would be used to help clear the enormous NHS backlog and fund a cap on social care.
Salary sacrifice pensions would become more attractive, she agreed, both for employees and employers.