New 1.25% social care tax hike
08 September 2021
On 7 September 2021, Government announced plans to implement a new social care levy, which they claim will raise £12bn a year over the next three years, in order to tackle the NHS backlogs caused by the Covid pandemic and to improve social care services.
This increase in National Insurance Contributions (NICs) for the 2022-23 tax year will apply to;
- Class 1 (paid by employees)
- Class 4 (paid by self-employed)
- Secondary Class 1 (paid by employers)
Once systems have been updated in 2023-24, a formal legal surcharge of 1.25% will replace the increase in NICs. This will also apply to those working above state pension age.
|
|
Employee Standard / higher rate |
Employer |
Self-employed Standard / higher rate |
|
Current NIC rates (2021-22) |
12% / 2% |
13.8% |
9% / 2% |
|
2022-2023 NIC rates |
13.25% / 3.25% |
15.05% |
10.25% / 3.25% |
|
2023-2024 NIC rates
Levy |
12% / 2%
1.25% |
13.8%
1.25% |
9% / 2%
1.25% |
|
Charged on all earnings above (2021-22 threshold - may be subject to change) |
£9,568 |
£8,840 |
£9,568 |
The changes will also include an introduction of an increased dividend tax from April 2022, which will increase the current rate of 7.5% to 8.75%.
Aspire Comment
Whilst the levy would assist in raising much needed funds in order to support the health and social care system in the UK, the increase may be daunting for both employers and employees given the financial implications of the Covid-19 pandemic, which has already negatively affected many businesses and jobs.
To speak to one of our advisors, call us on 0121 445 6178 or email enquire@aspirepartnership.co.uk for a chat to discuss the support we can provide to you and your business.