The new Health and Social Care Levy – increases to NIC and dividend tax

The new levy will increase all NIC rates by 1.25% from April 2022, this will affect employees, employers, self employed and the NIC paid on P11D benefits (such as company cars and private health care). The increase will apply to employed (include deemed employees) and self-employed individuals and partners earning above the class 1 primary threshold / class 4 lower profits limit (currently £9,568 in 2021/22). Employers will pay the additional 1.25% for employees earning above the class 1 secondary threshold (currently £8,840 in 2021/22).

From April 2023, the increases will be legislated separately as a “health and social care levy” and NIC rates will return to 2021/22 levels. This will also extend the levy to individuals over the state pension age in employment or self-employment. As that group are currently exempt from paying NIC the increases will hit from April 2023.

Alongside the levy the government has announced a 1.25% increase in dividend tax rates from 1 April 2022, taking rates to: 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers. It is expected these increases will also apply to trust tax rates as the current wording does not rule this out. The £2,000 dividend allowance will remain.

The government also announced there will be an autumn budget on 27 October 2021. We could see further tax increases announced then, although with the above seen as breaking the Conservative manifesto not to increase taxes there may be little appetite for further tax increases …for now.

If you wish to discuss the impact of the above to you, or your business, please do get in touch with us.

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