Andy Burnham has admitted, in as many words, that his plan for a new National Care Service might not add up. He told Times Radio that if there's a shortfall in the funding, "we'd have to be honest about that shortfall and where the money is coming from." Economists reading between the lines have already worked out where: income tax or National Insurance.
Our view is that this is worth planning around now, not because anything is decided, but because the direction of travel could hardly be clearer. A former director of the IFS and a senior economist at a major investment bank have both said, in public and on the record, that the numbers behind this policy don't work without a tax rise. When people with that job title say it plainly, business owners should take it as a genuine signal, not a guess.
What was actually announced
Burnham's plan is to change how the state pension triple lock works from 2030. Today the pension rises each year by whichever is highest out of inflation, average wage growth, or 2.5%. From 2030, under what's being called a "double lock," wage growth drops out of that comparison entirely, leaving inflation or 2.5%, whichever is higher. Because wages have often run ahead of both of those measures in recent years, the change is expected to slow the rate at which the pension rises, and the savings from that are meant to help pay for a new National Care Service, free at the point of use, along the lines of the NHS.
There are two problems with that plan, both of which Burnham has now effectively conceded. First, the savings don't start flowing until 2040, a full ten years after the care service is meant to launch. Second, funding the service is expected to cost £18bn a year, a bill that starts well before the double lock has saved anything at all.
What the economists actually said
Paul Johnson, former director of the Institute for Fiscal Studies, put it plainly on X: replacing the triple lock with a system tied to earnings over time, but never below inflation, "makes a lot of sense." But he added that "the idea this will pay for free social care any time soon, though, is for the birds. That will mean higher taxes."
Andrew Wishart, senior UK economist at Berenberg, made the same point with more detail. The double lock, he said, "will restrain spending on state pensions a little in the long run, but surely not by enough to fund a new social care service, free at the point of use like the NHS." His read is that the prime minister has effectively admitted this can't be funded without breaking Labour's 2024 manifesto promise not to raise personal tax rates, and that any argument for raising one of the main taxes will most likely wait until closer to the next general election, not be sprung on the country this year.
That timing detail matters for planning purposes. This is not a story about the Budget on 28 October, which we've already covered in our 12-week planning piece. It's a story about where personal and payroll taxes are likely headed later this Parliament, layered on top of everything else already pointing the same way this autumn.
Putting real numbers on what a rise would actually cost
Nothing is confirmed, and we're not predicting which tax moves or when. But "income tax or National Insurance" is vague until you put a number next to it, so here's what a modest, single-percentage-point rise would actually mean for three different kinds of Buzz client, using this year's rates as the illustrative baseline.
A small employer. Take a six-person team with a combined payroll of £220,000 a year. Employer National Insurance runs at 15% above a £5,000 secondary threshold per employee, so the NI-able pay here is £190,000 (£220,000 less six lots of £5,000). At 15%, that's £28,500 of employer NI, reduced by the £10,500 Employment Allowance the business can claim, for a net bill of £18,000. A single one-point rise to 16% pushes the raw NI to £30,400, and the net bill after the same allowance to £19,900. That's an extra £1,900 a year, before a single new employee is hired or a single pay rise given, purely from the rate moving.
A sole trader. Take a tradesperson with £45,000 of taxable profit. After the £12,570 personal allowance, £32,430 sits inside the basic rate band this year and is taxed at 20%, a bill of £6,486. A one-point rise to 21% takes that to £6,810.30, an extra £324 a year, for someone who has done nothing differently at all.
A director paying themselves a salary. Take an employee earning £35,000. Their own employee NI, separate from what their employer pays, runs at 8% on earnings between £12,570 and £50,270, so on £22,430 of NI-able pay that's £1,794.40 today. A one-point rise to 9% takes it to £2,018.70, an extra £224 a year out of their own pay packet.
None of these are large numbers on their own. The point is that a "one-point rise" sounds abstract right up until it's sitting in your management accounts as a real, recurring cost, and these are illustrative examples at one point, not the rate anyone has proposed.
What it means for you, depending on which one you are
If you employ people, the employer NI example above is the one to watch. It compounds with headcount, so a growing team means a growing exposure to exactly this kind of rate change, and it's worth knowing your own number before it happens, not after.
If you're a sole trader or partner, income tax is the more direct route for a rise like this to reach you, and the personal allowance has been frozen at £12,570 for several years now, which already pulls more of your profit into tax each year as prices rise, before any rate change is even on the table.
If you're a company director drawing a salary and dividends, both income tax and employee NI on the salary portion are exposed, and dividend tax sits on a separate schedule again. A change to any one of these shifts the maths on how you split your own pay between salary and dividends, which is exactly the kind of thing worth reviewing annually rather than assuming last year's split is still optimal.
What's still uncertain, and when we'll know more
A great deal is still open. There is no confirmed rate, no confirmed tax (income tax and National Insurance are both mentioned, not chosen between), and no confirmed date beyond "in the short term" to fund a service starting in 2030, contingent on Labour winning the next general election, which is not due until 2029 at the latest. Wishart's own reading is that any such rise will be argued for closer to that election, not this year. What is fixed today: the double lock replacing the triple lock from 2030, the £18bn annual cost estimate for the care service, and the fact that a former IFS director and a bank economist have both said the current plan can't pay for itself without a tax rise somewhere. We'll cover it properly the moment an actual rate or mechanism is confirmed, rather than speculate further today.
What to do this week
Work out your own number. Whichever of the three examples above looks most like your business, run the same one-point calculation against your actual payroll or profit figure, so a headline like this one has a real cost attached to it rather than a vague sense of unease.
Keep your Budget planning window open. The nearer-term 28 October Budget is a separate event, but the same underlying pressure, a government that has ruled out extra borrowing and made a manifesto promise not to raise headline tax rates, applies to both. Our 12-week Budget planning piece is still the right place to start on anything with a shorter fuse.
Get your salary and dividend split reviewed. If you're a director, this is the lever most within your own control, and it's worth checking annually rather than leaving it on autopilot.
This is exactly the territory our tax planning service is built for: modelling what a change like this would actually cost your specific business, before it's confirmed, so there are no surprises if and when it lands.