Health and Social Care Levy

September 7th, 2021 | Posted in PAYE, Payroll, Small Business, Tax Planning

Health and Social Care Levy A surprise announcement in advance of the Budget confirmed that from April 2022 a new 1.25% Health and Social Care Levy will be introduced and will be specifically ringfenced for health and social care.  To give HMRC time to update their systems the levy will initially be added to national insurance contributions (NICs) for the employed, employers and self-employed for one tax year from April 2022 to March 2023. From April 2023, the levy will be an entirely separate deduction, with NICs returning to their current levels.  Significantly, from April 2023 the new levy will be paid by all adults, including those over state pension age and still in employment – these individuals do not currently pay employees’ national insurance. To level the playing field between the employed and those with investment income, dividend tax will also increase by 1.25% from April 2022.

  Current Rate April 2022 – March 2023
Class 1 Employee on earnings above of £9,568 and up to £50,270 12% 13.25%
Class 1 Employee Contributions on earnings above £50,270 2% 3.25%
Class 1 Employer contributions above £8,840 13.8% 15.05%
Class 4 Self-Employed contributions on earnings above £9,568 and up to £50,270 9% 10.25%
Class 4 Self-Employed contributions on earnings above £50,270 2% 3.25%
Dividend Tax – Basic Rate 7.5% 8.75%
Dividend Tax – Higher Rate 32.5% 33.75%
Dividend Tax – Additional Rate 38.1% 39.35%

The £4,000 Employment Allowance which benefits small businesses will apply to the Levy as well as employer NICs.

Aside from the new Health and Social Care Levy it has also been confirmed that this year’s Budget will be held on 27 October 2021.

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