Part 2 – How much are your Income and Savings?
This is a charge that can be levied on all forms of income. Earnings, Unemployment Benefits, Disability Benefits, Retirement pensions can all be taken into account. For the purposes of the calculation all income from Housing Benefit and Council Tax Benefit are taken into account. A financial assessment is carried out by each local authority on each person assessed for services.
Many local authorities will insist that every person who receives social care takes additional help to claim and maximise any income related benefits that they may be entitled to. This is done in order to increase the amount of income of person has so that they pay more Care Tax.
Savings whether they have already have income tax paid on them or are invested in Tax free plans such as ISAs are treated as having a notional income. Savings are divided into 3 bands.
1.The first band is an amount that is treated as being completely disregarded. This can be as low as £6,000 in Midlothian up to £14,500 in Dumfries & Galloway. This amount is not included in the income calculation and will not be used to contribute to the Care Tax.
2.Savings between the disregarded limit and a local maximum is treated as generating income at between 10% and 20% per annum. Such interest rates are between 5 and 10 times as much as can be gained in the Best Buy savings accounts in 2013. The result is a net depletion of savings in this intermediate band. The higher 20% income assumption is applied in councils such as Glasgow City, North Ayrshire, South Lanarkshire and 5 other council areas.
The local maximum can vary from as low as 12,000 up to £23,500 while yet more councils treat all savings above the minimum as generating income at the set interest rate. Despite the Wonga type interest levels, having a high or infinite maximum can allow savers to use their savings for other choices in their lives. Whether this is additional respite breaks or superior aids and adaptions, many benefit from the flexibility.
3. Where there is a local maximum level for savings, then all savings above that maximum level are treated as available income. That means people must pay the full cost of their social care services until their savings fall to the maximum level. As a result in East Lothian, someone with £25,000 of savings would probably have to pay the first £9,000 of their social care costs before it was assessed on their income. In Edinburgh, the same person would probably only have to pay £1,500. And in Highland, that person would be able to benefit from an income assessment from the start as there is no savings maximum.
Stage Three – What are your Allowable Expenses
This third stage is where the local council is allowed to determine how much an individual who requires social care should have to live on. They are allowed to do this without any external inspection or challenge by the people affected. Councils do not have to have regard to the level of benefits that the state decides that they should have because of their particular circumstances.
They are able to treat a single person without a disability who requires social care as needing the same level of income as a person with profound and complex learning disabilities.
In Scotland the most common practice is for local authorities to take the basic Income Support, the basic Disability Premium and add 16.5% on top. This is roughly £120 per person per week for those under 60. A higher rate of about £170 applies to those over the age of 60 based on the Pension Credit Level.
Most councils also have a couples disregard set using a similar formula. A very small number of councils treat couples as two individuals.
In addition to this housing costs and council tax will be allowed for. The full amount of any award of the Mobility Component of Disability Living Allowance is treated as an allowable expense.
Where no night time care is provided and the person is in receipt of the Higher Rate of the Care Component of Disability Living Allowance then an allowable expense of the difference between the middle rate and higher rate is made, currently this is roughly £26 per week
Where an individual is in work, the appropriate personal disregard is applied, in most cases an additional £20. As a result where a person requiring some social care support is in employment and not drawing on any income related state benefits they will at best be £20 better off than those not in work.
Stage Four – Applying the Care Tax Rate
Subtracting the Allowable Expenses from the assessed income give an applicable amount. How much of the applicable will be paid to the local council depends on the Care Tax rate for that local authority. These tax rates are set annually by local authorities and there is considerable local variation in rates used.
A small number of councils apply higher rates to those over 60 than they do to those under 60. These include Glasgow (100%), North Ayrshire (50%) and Edinburgh (70%).
100% on the spare income after allowances of people getting care is a higher tax rate than anyone else in the country has to pay. For comparison we have included in the table the major applicable tax rates for the UK.
The current highest tax rate in the UK is for people who are high earners and only applies to income above the level of £41,400. Care Tax payers in 25 local authorities pay higher rates on a lot less income.
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