UK and International Tax news

PM Announces New Health And Social Care Levy

Wednesday 8th September 2021

The UK Prime Minister announced yesterday a new Health and Social Care Levy, based on National Insurance Contributions, to pay for the impact of the coronavirus pandemic on the NHS and to fund increased spending on health and social care.

The Levy will be introduced from April 2022, when NICs for working age employees, self-employed and employers will temporarily increase by 1.25%. There will also be an increase in the rates of dividend tax.

From April 2023, once HMRC’s systems are updated, the 1.25% Levy will be formally separated out and also apply to individuals working above State Pension age, and NICs rates will return to their 2021-22 levels. Together with an increase to the rates of dividend tax, the Levy is estimated to raise £12 billion per year on average for health and social care across the UK.

The Levy will be paid by employed and self-employed individuals and partners earning above the Primary Threshold/Lower Profits Limit of £9,568 [currently]. In 2022-23, a typical basic rate taxpayer earning the median basic rate taxpayer’s income of £24,100 is expected to pay an additional £180 and a typical higher rate taxpayer earning the median higher rate taxpayer’s income of £67,100 would be expected to pay an additional £715.

Employers will pay the Levy for employees earning above the Secondary Threshold of £8,840 [currently], although existing reliefs will apply for employers of apprentices under the age of 25, all employees under the age of 21, veterans, and new employees in Freeports from April 2022.

The Employment Allowance allows eligible employers to reduce their annual employer National Insurance liability by up to £4,000.  An estimated 40% of all employers, around 640,000 businesses, are expected not to pay the Levy due to the Employment Allowance in 2022-23.

From April 2022, all rates of dividend tax will increase by 1.25%.  Current dividend tax rates of 7.5%, 32.5% and 38.1% will increase to 8.75%, 33.75% and 39.35% from 2022/23. Dividend tax is charged on taxable dividend income an individual receives that falls outside of the personal allowance (£12,570 in 2021-22) and the dividend allowance (£2,000 in 2021-22).

For further details on the new Levy, please contact Keith Rushen on 0207 486 2378.

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