Noticed a rise in your National Insurance Contribution? Well, that’s the new Health and Social Care levy. This blog is going to run through everything you need to know right now about the new levy.
The new tax-raising measures that have been in effect since 6 April 2022 are part of the Government’s plan to pay for health and social care. These measures are collectively referred to as the Health and Social Care Levy.
The Prime Minister announced on 7 September 2021 the new tax raising measures that have taken effect from 6 April 2022 as part of the Government’s plan to help fund health and social care in the present and foreseeable future.
So, as of 6 April 2022 (2022/23 tax year) employers, employees, (Class 1 NIC) the self-employed who are liable to pay National Insurance Contributions (Class 4 NIC), individuals receiving dividends and those that would pay if it not for pension age restrictions, are liable to pay the new Health and Social Care levy of 1.25% on top of their National Insurance Contributions and Dividend Tax rates.
This will mean that their contributions will rise from and to the following rates:
This equates to a ‘real world’ cost to you (the employee) and based on the following income amounts of £19,760* and £53,000pa
£19,760 Gross Income (under State Pension age and excluding pension contributions)
Figure of £19,760 is based on being paid National Minimum Wage for 23 years and over rate for 2022/23 Tax year. Self-employed Class 2 charge is based on a FULL Tax year of contributions
£53,000 Gross Income (under State Pension age and excluding pension contributions)
*Self-Employed Class 2 charge is based on a FULL Tax year of contributions
Figures listed are guideline variances and are for representative purposes based on Primary Thresholds of £9,568 (2021/22) and £9,880 (2022/23)
From 6 April 2023 the National Insurance rates will stay at their current levels and there will not be a new standalone 1.25% Health and Social Care Levy on the earnings and/or profits that are subject to NICs as per 2022/23’s Tax year.
Workers who are over the state pension age, who are not currently liable to pay NIC’s on their earnings, will be subject to the 1.25% levy from 6 April 2023 to the extent that their earnings exceed the primary threshold for National Insurance (£12,570 in 2022/23 from July 2022). Self-employed individuals with profits exceeding the lower profits limit of £12,570 are similarly affected.
The answer is, individuals that only pay Class 2 and Class 3 National Insurance. Class 2 National Insurance is a flat rate charge that any sole trader must pay per week each tax year they are trading and making a profit over the Small Profits Threshold (£6,725 for 2022/23 TY). Whilst Class 3 National Insurance is for people who wish to ‘top up’ their missing National Insurance contributions in a tax year, to allow them to benefit from Contribution -based benefits (such as State Pension), these are typically around £15pw (£15.85pw for 2022/23 Tax Year.)
Hopefully, I have covered all the basic terms of the new Health and Social Care levy that has come into force, and you now have a better understanding of its effects.
To find out more about any aspect of the above, please feel free to contact us via our online form to book in for a chat.
