If income tax and national insurance remain at current levels, new research warns care workers could lose an estimated £1.4bn in take-home pay.
Care England has published data showing frozen income tax and national insurance thresholds could reduce care workers’ earnings by around £1.4bn before the Fair Pay Agreement comes into effect in April 2028.
The Fair Pay Agreement, announced in September last year, is designed to set minimum standards for pay and working hours in an effort to address recruitment and retention issues that have long plagued the sector.
So far, the government has earmarked £0.5bn to deliver the agreement, but Care England warns the majority of it could be offset by higher taxes.
The charity said that keeping tax thresholds at current levels until 2031 – a decision that was made in the 2025 Autumn Budget – limits the benefits of national living wage increases for care workers.
According to the research, in 2026/27 frozen thresholds will reduce take-home pay across the adult social care workforce by around 0.7%, costing roughly £230m.
Meanwhile, by 2027/28 the annual loss rises to about £470m. In 2028/29, the first year the Fair Pay Agreement takes effect, approximately £720m would be lost, with total reductions since 2025/26 reaching £1.4bn.
By 2029/30, the impact is expected to exceed 3% of pay annually, costing nearly £1bn each year.
In addition, employer national insurance thresholds remaining at current levels are also forecast to increase provider costs by £41m in 2026/27, rising to £176m per year by 2029/30.
Professor Martin Green OBE, chief executive of Care England, said: ‘The Fair Pay Agreement is being treated as the answer to some of the biggest challenges facing social care…But our analysis shows that, unless government deals with the impact of frozen tax thresholds, care workers will not feel better off in reality.
‘If pay reform does not translate into higher take-home pay, it will not rebuild trust, it will not stabilise the workforce, and it will not deliver the change the sector has been promised by the Fair Pay Agreement.’
Dr Jane Townson OBE, chief executive of the Homecare Association, explained: ‘Frozen tax thresholds are quietly taking back a growing share of pay increases.’
Concluding their research, which can be read in full here, Care England is calling on the government to increase funding for the Fair Pay Agreement and act before April 2028.
Professor Green added: ‘If the government allows this to continue, the system will weaken further, and it will be far harder to put right later.’
Image: Tara Winstead/Pexels
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