NIC Rise: The Health & Social Care Levy

On the face of things perhaps no big deal, but in a society that has traditionally seen very small changes to the tax & NI system a 10% rise in one fell swoop is not one to be casually shrugged off.

Assuming current NI banding remains unchanged in the 2022-23 tax year, the budget will give us a further insight later in the Autumn, employees will continue to pay zero NI on earnings below £797. Any earnings between £797 – £4,189 will see a charge of 13.25%, whilst earnings above £4,189 will be charged at 3.25%. An employee earning £25,000 per annum can expect to be £16.08 worse off on a monthly basis.

For employers the rate will increase from 13.8% to 15.05% on all earnings above £737 per month. Earnings beneath this figure will stay as zero rated. The increase in cost per month for a £24K employee will rise by £16.83. Employer’s who pay their staff a guaranteed net amount would do well to renegotiate their contracts, as the increase in costs ill be far more marked.

As mentioned, this increase is due to come in from April 2022. Initially, apart from the increase in NI contributions, employees will not notice any difference on their payslips. However, from April 2023 NI contributions will fall back to their current rate of 12% employee & 13.8% employer and a separate payslip heading of Health & Social Care Levy will be shown on the payslip.

More developments and information will be published in time however one further change needs to be highlighted here and now as, in addition to the above, the levy will also be extended to those over state pension age &, who currently pay zero NI, who are in employment. This could well necessitate yet more new NI codes being introduced.

Disclaimer - All information in this post was correct at time of writing.