Following Prime Minister Boris Johnson’s announcement of the introduction of a new health and social care tax to boost funding for the NHS, in this blog post I take a look at what this means for you.
The social care levy will initially see employees and the self-employed pay an extra 1.25% in National Insurance contributions (NICs) from April 2022. Dividend tax will also rise.
From April 2023, this rate will remain in place but in the form of a ‘health and social care levy’, at which point state pensioners who continue to work will also pay the levy.
Employees currently pay 12% in Class 1 NICs on earnings between £9,568 and £50,270, and 2% on earnings above that, while employers pay a flat rate of 13.8%.
The self-employed will also see Class 4 NICs rates rise, with the main rate of 9% increasing to 10.25% and the higher rate from 2% to 3.25%.
The increase in NICs stands to generate an additional £12 billion for health and social care.
Some form of tax rise was expected but the level of charge and scope is wider than initially expected. The impact upon the working population has been widely discussed in the media. For our business clients who are employers, they will need to budget for this extra cost post April 2022, affecting not just their Class 1 contributions, but Class 1A as well. Private company shareholders will also need to plan for the extra liabilities that the charge on dividends will create.
Martin Tomes is HSKSG’s Director of Tax, He specialises in assisting and advising individuals and their businesses in all areas of taxation with an emphasis on tax planning, mitigation and compliance and also heads up the firm’s specialist property sector group.