What does the new national insurance levy mean to you and your business?
Yesterday, Boris Johnson announced a 1.25% health and social care levy on earned income, in order to raise funds for health and social care across the UK.
Speaking about the National Health Service, the Prime Minster said “Covid has put enormous pressure on the NHS” and in order to not only “tackle Covid backlogs” but to also reform an already struggling service, a record investment would be required. The additional levy is expected to raise £36 billion over three years.
When and how will the new health and social care levy be introduced?
In April 2022, the 1.25% levy will be raised via a temporary increase to the National Insurance Contributions (NICs). This will impact Class 1 (employee and employer), Class 1A, Class 1B, and Class 4 (self-employed). In April 2023, the NI will revert back to its current rates and the health and social care levy will be separated out on its own.
Who will be affected by the 1.25% levy?
The new levy will then be paid by all working adults and will also include those above the state pension age who are still working. The exception is those earning less than £9,564 a year or £797 a month, who don’t pay National Insurance and won’t have to pay the new levy.
How will this levy affect my business?
The 1.25% increase in NICs for the 2022-23 tax year applies to NICs paid by both employees and employers. This increase is a real cost for employers and should be factored in when budgeting and planning expenditure from April 2022.
Will there be an increase in tax on dividends?
Yes there will! Dividend tax will also rise from 2022 by 1.25% to help cover the costs of the social care package. This will not affect shares held in tax-exempt savings accounts, known as ISAs. The £2,000 tax-free allowance for dividend income will also remain unaffected.
How can we help you?
f you have any questions or uncertainties around this new levy and what it will mean to you and/or your business then please pick up the phone and give us a call on 01925 761600.