The Government has introduced a new Health & Social Care Levy to fund the NHS and the Social Care sector and initially pay for the backlog in the NHS
At first, this will show as an increase in NI Contributions from 6th April 2022. In later years it will be shown as a separate levy distinct from NIC’s which will return to normal rates
Class 1 NIC (Employee) and class 4 (Self -Employed) will both increase by 1.25% so the employed and self-employed will be hit by the increase equally
The changes will affect working age employees, employers and the self-employed, as well as directors taking dividends as the dividend tax, will also increase by 1.25% to 8.75%
In 2022/23 a typical taxpayer will pay the following additional amounts, depending on the tax band…
- Basic rate taxpayer (earning £24,100) – £180 extra
- Higher rate taxpayer (earning £67,100) – £715 extra
The new rates are…
- Earnings between £0 and £184 per week – Nil
- Earnings between £184 and £967 – increase 12% to 13.25%
- Earnings above £967 – increase 2% to 3.25%
- Self-employed earnings between £9500 & £50000 – increase 9% to 10.25%
How will this affect the Average Employee…
Whilst the amounts involved are not huge, this is coming at a time when inflation is rising and fuel prices are going to be a real concern for people so every little extra that is taken in tax could well have a material impact on family finances.
Employers are being hit too (worse in fact) and are already reeling in many instances from other costs rises such as automatic enrolment for pensions and the national living wage as well as the normal inflation rises that the rest of us are suffering.
The Government say if not now, when should this be brought in but could this be the straw that breaks the camels back for many taxpayers.
| Earnings Level | £12,570 p/a | £50,000 p/a | £100,000 p/a | |||
| Earnings between Primary Threshold £9,564 & Upper Earnings Limit £50,270 | £3,006 | £40,436 | £40,706 | |||
| Earnings above Upper Earnings Limit £50,270 | – | – | £49,730 | |||
| Rate of basic NICS | 12% | 13.25% | 12% | 13.25% | 12% | 13.25% |
| Liability above Primary Threshold | £361 | £398 | £4,852 | £5,358 | £4,884 | £5,393 |
| Rate of higher NICs | 2% | 3.25% | ||||
| Liability above Upper Earnings Limit | £995 | £1,616 | ||||
| Total employee NICs | £361 | £398 | £4,852 | £5,358 | £5,879 | £7,009 |
| Total Additional Employee Contributions | £37 | £506 | £1,130 | |||
| Employer contributions: Earnings above Secondary Threshold £8,840 | £3,730 | £41,160 | £91,160 | |||
| Rate of NICs | 13.8% | 15.05% | 13.8% | 15.05% | 13.8% | 15.05% |
| Employer’s liability | £515 | £561 | £5,680 | £6,195 | £12,580 | £13,719 |
| Total Additional Employer Contributions | £46 | £515 | £1,139 | |||
How will this affect the Average Self-Employed Person…
| Earnings level | £12,570 p.a. | Basic Rate: £50,000 p.a. | Higher Rate: £100,000 p.a. | |||
| Earnings between Lower Profit limit £9,568 & Upper Profit limit £50,270 | £3,002 | £40,432 | £40,702 | |||
| Earnings above Upper Profit limit | – | – | £49,730 | |||
| NICs basic rate | 9% | 10.25% | 9% | 10.25% | 9% | 10.25% |
| NICs Liability above Lower Profits Limits (£9,568) @ 9% / 10.25% | £270 | £308 | £3,638 | £4,144 | £3,663 | £4,172 |
| NICs higher rate | 2% | 3.25% | ||||
| NICs Liability above Upper Profits Limit (£50,270) @ 2% / 3.25% | £995 | £1,616 | ||||
| Total NICs payable | £270 | £308 | £3,638 | £4,144 | £4,658 | £5,788 |
| Total Additional Self-Employed Contributions | £38 | £506 | £1,130 | |||
