1.25% Uplift in NICs funds NHS, Health & Social Care
Despite strong opposition to the timing of the levy, the government looks set to introduce the Health and Social Care Levy from 6 April 2022.
National Insurance contributions for employees under State Pension age, self-employed people and employers will increase by 1.25 percentage points and be added to the existing NHS funding allocation.
If you’re an employer
From 6 April 2022 to 5 April 2023
Employer Class 1, employee Class 1, Class 1A, Class 1B and Class 4 National Insurance contributions will increase by 1.25%.
From 6 April 2023
The National Insurance contribution rates will go back down to 2021-2022 levels.
The levy will become a separate new tax of 1.25%.
You’ll need to report it as a new item through your payroll and you will need to show it separately on payslips for employees who have to pay it.
Existing employer reliefs and allowances that apply to National Insurance contributions will also apply to the levy.
If you’re Self-Employed or an Employee, you can find out more here.
If MATCH handles your payroll this will be taken care of for you.
What about taxes on other sources of income, such as dividends, pensions and property?
In addition to the new levy, there will also be a 1.25% increase in taxes on dividend income from April 2022. The government argues that business owners and investors (who receive their income in the form of dividends, rather than earnings) should make a “contribution in line with that made by employees and the self-employed on their earnings.
However, other forms of income, such as those from pensions and property, will not be affected by the new levy, as they would have been if instead income tax rates had been increased.
The levy echoes the words mentioned at the very start of the pandemic that everyone will have to contribute in the recovery. Instead of taking on more debt to invest, the Government has decided to raise taxes. The issue is that back in December 2021, there was not the economic backdrop there is now with rising costs and inflation. The timing has therefore led to calls to postpone the increase.
For now, the Government seem insistent on rolling it out but does have a history of U-turns. Watch this space!
MATCH is working hard to keep on top of all the latest news and government support so, as always, feel free to get in touch if you have any queries and we’ll be happy to help.
MATCH Accounting Limited