Health & Social Care Levy
Posted on 28th October 2021 at 16:37
The new measure introduced to increase National Insurance Contributions (NIC) rates by 1.25 percentage points to both the main and additional rates of Class 1 (employee), Class 1A (employee benefits), Class 1B (employer) and Class 4 National Insurance (self employed) contributions will take effect from 6th April 2022 - 5th April 2023. The revenue raised will go directly to support the NHS and equivalent bodies across the UK.
Effect Of National Insurance Increases:
* Self-employed individuals will pay 10.25% NIC on profits between £9,569 and £50,270 and 3.25% on any profits in excess of £50,270 per year.
* Employers will pay a total of 15.05% NIC on all employee's earnings above the secondary threshold of £8,840 per year *(subject to exemptions which may apply). In addition an increase of 1.25% will be attributed to Class 1A and 1B NICs.
* Employee's will pay 13.25% NIC on salaries that fall between the primary threshold of £9,568 and upper threshold of £50,270 per year (any salaries / bonus above £50,270 will carry NIC @3.25%).
As from the 6th April 2023 NIC rates will reduce back to 2021 - 2022 tax year levels, but will however be replaced by a new 1.25% Health and Social Care Levy (HSCL), where the revenue will be ringfenced to support UK health and social care bodies. The monetary effect for each taxpayer will be the same.
Those individual taxpayers who have reached state retirement age and who are employed / self employed and who earn at least £184 per week will however pay the new levy from the 6th April 2023. At present taxpayers who are over the state pension age do not pay NIC on wages or profits, whereby employers do.
Employers' NIC Reliefs:
The NIC rise will increase the cost for all employer's by an additional 1.25% relating to employee's salaries and benefits.
There is however a number of allowances and zero rates that employer's can claim in order to reduce the amount of employers Class 1 NIC payable on employee's wages. Zero rate can be claimed for the following categories of employee's on wages up to £50,270 per year for:
✔ Apprentices aged under 25
✔ Anyone under the age of 21
✔ Ex-forces personnel (for the first 12 months of civilian employment)
* Subject to limits*
Dividend Tax Increases
The rate of income tax charged on dividends received from the 6th April 2022 will be increasing, however the first £2k of dividend income per year and dividends within ISA's will still be tax free.
Dividend Rates:
Basic rate band - 8.75%
Higher rate band - 33.75%
Additional rate band - 39.35%
Dividends, interest and property income are not subject to NIC, although some landlords pay the the flat rate of class 11 NIC at £3.05 per week.
♦ Income tax on interest and property income will not increase.
For help and advice on this or any tax / accountancy matters then please contact us:
Tagged as: #Dividends, #Employees, #Employers, #Health & Social Care Levy, #HSCL, #National Insurance Contributions, #Self Employed
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