Tax changes for Health and Social Care

Last week the government announced tax changes for Health and Social care to fund the £12 billion a year to be spent on the NHS and social care across the UK.

These are the changes that are being made to personal income tax and National Insurance contributions for employees and employers.

Changes from April 2022

National Insurance contributions (NICs) will increase by 1.25% for one year only for employees, employers and the self-employed from‌‌ ‌April‌‌ ‌2022. This will cover both Class 1 (employee and employer), Class 1A and 1B and Class 4 (self-employed) NICs. Those above State Pension Age are not impacted by the April 2022 changes.

Changes from April 2023

From April 2023, a new ringfenced Health and Social Care Levy of 1.25% will be introduced which will apply to those who pay Class 1 (employee and employer), Class 1A and 1B and Class 4 (self-employed) NICs and will also be extended to those over State Pension age who are in work. When the new levy comes into effect, National Insurance rates will revert back to current levels.

The levy will also apply to individuals above State Pension age with employment income or profits from self-employment above £9,568.

The levy will be administered by HMRC and collected through the current reporting and collection procedures for NICs – Pay As You Earn and Income Tax Self Assessment.

Like National Insurance, levy contributions will apply UK-wide, people will pay the same in England, Scotland, Wales and Northern Ireland.

From 2023-24, levy contributions will need to appear as a separate item on payslips. Where possible a generic message should be included payslips for the next tax year (2022-23). More information on payslip requirements will be available in due course.