From April 2022, the Government is introducing a UK-wide 1.25 percent Health and Social Care Levy based on National Insurance contributions (NICs) ringfenced to fund investment in health and social care. This will apply to working age employees, self-employed and employers. From April 2023, once HMRC’s systems are updated, the 1.25 per cent Levy will be formally separated out and will also apply to individuals working above State Pension age, and NICs rates will return to their 2021-22 levels.
The Levy will apply to the same population and income as Class 1 (Employee, Employer) and Class 4 (Self-Employed, including partners) National Insurance, and to the main and higher rates. From April 2023 onwards the Levy will also apply to those above State Pension age who are still in employment. The increase will not apply to Class 2 NICs (the flat rate paid by the Self-Employed with profits above the Small Profits Threshold, which is currently £6,515 per year) or Class 3 NICs (voluntary contributions for taxpayers to fill in gaps in their contributions’ records to qualify for benefits).
Existing NICs reliefs to support employers will apply to the Levy. Companies employing apprentices under the age of 25, all people under the age of 21, veterans and employers in Freeports will not pay the Levy for these employees as long as their yearly gross earnings are less than £50,270, or £25,000 for new Freeport employees.
The Levy will be administered by HMRC and collected by the current channels for NICs – Pay As You Earn and Income Tax Self-Assessment. The Levy, including the temporary NICs increase in 2022, will be legislated for shortly.
A typical basic rate taxpayer earning £24,100 will contribute £180 in 2022-23, while a typical higher rate taxpayer earning £67,100 will contribute £715.
The rates of dividend tax will also increase by 1.25% to help fund this package.
As always, if you have any questions, please get in touch with a member of the team.