A new proposal suggests implementing a 1% income tax surcharge for individuals over 40, encompassing the basic, higher, and additional tax rates, as part of comprehensive reforms to social care under Labour leader Andy Burnham.
The recommendation comes from a report by the thinktank Compass, led by Neal Lawson, a close ally of Mr Burnham. The report argues for the introduction of this surcharge to finance the ambitious social care reforms championed by the Makerfield MP.
Currently, eligibility for publicly funded social care depends on both care needs and financial means. Individuals must have sufficiently high care needs and possess assets below £23,500 to qualify for state support.
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The Compass report, titled “Ending Business As Usual,” highlights the limitations of previous reforms, such as capping care costs, which aimed to reduce financial penalties. It advocates for a more fundamental change, stating: “The government should introduce a universal entitlement to free personal care for everyone assessed as having a defined level of eligible need, regardless of age.”
Under this proposal, once an individual meets the eligibility criteria, their personal care-including assistance with washing, dressing, eating, medication, and mobility-would be provided free of charge, irrespective of their income or assets. The entitlement would exclude accommodation and ordinary living costs, which would remain the responsibility of individuals and their families, supported by the state where applicable.
To fund this entitlement, Compass proposes a one percentage point income tax surcharge for those aged over 40. This measure is projected to raise approximately £8-9 billion annually in England, prior to accounting for behavioural changes among taxpayers.
The surcharge would apply across all income tax bands-basic, higher, and additional-on the basis that individuals at all income levels may require free personal care at some point. The report notes that the figures are indicative and actual revenue would depend on factors such as tax base changes, taxpayer behaviour, and interactions with devolved tax systems.