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New Health and Social Care Levy Confirmed

This week, MPs backed the government’s plan to raise taxes to fund spending on the NHS and social care. These changes aim to raise £12bn annually to help fund the NHS and social care in the UK.

National Insurance contributions (NICs) will increase by 1.25% for one year only for employees, employers and the self-employed from‌‌ ‌April‌‌ ‌2022. 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.

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 and will also be extended to those over State Pension age who are in work. When the new levy comes into effect, National Insurance rates will revert 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.

This additional payment will be collected via the existing NICs collection and reporting processes (Pay and You Earn and Self Assessment returns).

The Government announced that its £36 billion social care fund (raised over three years) would be spent on innovation and new technology, with the investment paying for new treatments, diagnostic and surgical methods to help see more patients quickly and safely. 

Implementing the Health and Social Care Levy

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. This applies UK-wide.

From 2023-24, levy contributions will need to appear as a separate item on payslips. Where possible a generic message should be included payslips for the next tax year (2022-23). More information on payslip requirements will be available in due course.

Increased Tax on Dividend Income

The government will also increase by 1.25% from April 2022 the rate of income tax which is paid by people who receive dividend income from shares.

Are you concerned about how these changes affect you or your business?

Contact the friendly experts at Hargreaves Owen. We’re here to help.

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