Tax changes to fund Health and Social Care
Recently the government announced tax changes to fund £12 billion a year to be spent on the NHS and social care across the UK.
Employees, Employers & Self-Employed
National Insurance contributions (NICs) will increase from April 2022 by 1.25% for one year only for employees, employers and the self-employed. This will cover both Class 1 (employee and employer), Class 1A and 1B and Class 4 (self-employed) NICs. Those above State Pension Age are not impacted by the April 2022 changes.
Also, from April 2022 the government is increasing the rate of income tax on dividend income from shares by 1.25%. The current basic rate of income tax on dividend income is 7.5%.
Future Health and Social Care Levy
From April 2023, a new ringfenced Health and Social Care Levy of 1.25% will be introduced which will apply to those who pay Class 1 (employee and employer), Class 1A and 1B and Class 4 (self-employed) NICs. When the new levy comes into effect, National Insurance rates will revert back to current levels.
The levy will also apply to individuals above State Pension age with employment income or profits from self-employment above £9,568.
The levy will be administered by HMRC and collected through the current reporting and collection procedures for NICs – Pay As You Earn and Income Tax Self Assessment.
Like National Insurance, levy contributions will apply UK-wide, where people will pay the same in England, Scotland, Wales and Northern Ireland.
From 2023-24, levy contributions will need to appear as a separate item on payslips. Where possible a generic message should be included on payslips for the next tax year (2022-23). More information is expected to be published in due course.
Author: Susie Campion FCCA
Educated at Lancaster Girls' Grammar School, Susie joined Scott & Wilkinson in 1995 and qualifed as an accountant in 2002. As a Partner, Susie’s specialisms include managing the firm's large group audits and leading on staff...
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