You will no doubt be aware that the Prime Minister, Boris Johnson, announced that he will be putting more funding for the NHS and Social Care.  This change is being introduced to help the NHS and Social Care recover from the Coronavirus pandemic.

This funding will be done through a new social care levy, which will lead to increases in tax and national insurance contributions.  This will be a new tax and separate from national insurance contributions.   However, as it will take HMRC some time to update their systems, the changes will come about initially through increased national insurance rates and dividend tax rates.

Changes from April 2022

National insurance contributions (NICS) are increasing by 1.25% for one year only for employees, employers and the self-employed.

This covers both Class 1 – employee and employer, Class 1A and 1B and Class 4 – self-employed contributions. Those above state pension age aren’t impacted by the April 2022 changes.

The rate of income tax which is paid by people who receive dividend income from shares is also increasing by 1.25% from 7.5% to 8.75% for basic rate tax payers and from 32.5% to 33.75% for higher rate taxpayers, and from 38.1% to 39.35% for additional rate taxpayers.

Changes from April 2023

HMRC will collect the extra tax as a new Health and Social Care Levy and 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.

HMRC will administer the levy and collect it through the current reporting and collection procedures for NICs – Pay As You Earn (PAYE) and Income Tax Self Assessment.