Introduction of Health & Social Care Levy
Posted – 20/09/2021
From April 2022 there will be a temporary 1.25% rise in National Insurance Contributions (NICs) paid by both employers and workers.
From April 2023, this will then be replaced by a new 1.25% Health & Social Care Levy which will be shown as a separate line on an employee’s payslip.
Individuals above State Pension age will not be affected by the temporary increase to National Insurance contributions for the 2022 to 2023 tax year but will be liable to pay the levy from April 2023.
The 1.25% increase also applies to the Class 4 contributions paid by the self-employed on their profits, increasing the rate from 9% to 10.25%.
Class 1 contributions paid by employees will increase from 12% to 13.25%.
The employers Class 1 rate will increase from 13.8% to 15.05%, however many small businesses are able to set off a £4,000 employment allowance against their employers NIC liability.
Income from share dividends, earned by those who own shares in companies, will also see a 1.25% tax increase.
This would mean that after the £2,000 tax free dividend allowance the rate of tax would be 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for those with income in excess of £150,000 a year.
The policy paper can be found at https://www.gov.uk/government/publications/health-and-social-care-levy/health-and-social-care-levy with further details being set out in the Command Paper https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1015736/Build_Back_Better-_Our_Plan_for_Health_and_Social_Care.pdf
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