Rises in NI & Dividend Income Tax – Health & Social Care Levy
On Tuesday 7 September the UK government made an announcement on a new 1.25% health and social care levy on earned income, with dividend rates increased by the same amount.
This levy was pledged to increase funding for health and social care over 3 years and will be funded by a new tax called The Health and Social Care Levy.
The 1.25% Health and Social Care levy will be a separate tax to Income Tax and National Insurance and means people starting care from October 2023 should not pay more than £86,000 over their lifetime (not including accommodation) and those with assets of less than £20,000 will not make any contribution.
National Insurance Increases
- From April 2022, National Insurance contributions (NIC’s) will increase by 1.25% for businesses, employees and the self-employed.
- From April 2023, National Insurance will return to its former level and the new legislatively separate Health and Social Care Levy will be introduced, also at 1.25%. This will be paid by businesses, their employees and the self-employed and will also apply to working pensioners, who cease to pay National Insurance once they reach retirement age. Those earning less than £9,564 won’t have to pay National Insurance or the new levy.
- Dividend income tax rates in all income tax bands will also increase by 1.25% from April 2022.
For further NICs information visit latest National Insurance rates and thresholds guidance for employers (updated).
More information will follow once further guidance has been made available.
If you want to talk through these changes in terms of how they might impact your business, contact our accounting specialists at LHP who will be happy to help. Let’s Talk.