New Health and Social Care Levy
On 7 September 2021 the government, as part of its intention to reform the care sector and NHS funding, announced a new tax:
The Health and Social Care Levy. Initially this will operate as an additional National Insurance (NI) contribution but from 2023 will be a separate tax.
From April 2022,
NI contributions are set to rise through the introduction of a 1.25% Health and Social Care Tax Levy on earned income.
The Health and Social Care Levy will be paid by both employers and employees, plus the self-employed, from April 2022, and this will be extended in April 2023 to workers who continue to work after
state pension age.
Should the new levy operate in a similar way to National Insurance the attraction of pension salary sacrifice increases.
How much will I have to pay?
The following table shows the changes in payment amounts, for employees, following the introduction of the National Insurance increase.
| Income |
Current National Insurance payments |
National Insurance payments after rise |
| £10,000 |
£51.84 |
£57.24 |
| £20,000 |
£1251.84 |
£1382.24 |
| £30,000 |
£3651.84 |
£4032.24 |
| £40,000 |
£5078.84 |
£5709.24 |
| £50,000 |
£5478.84 |
£6359.24 |
| £60,000 |
£5878.84 |
£7009.24 |
Contributions to care
There will also be a new care cost cap. Currently, anyone in England with assets over £23,250 must pay for their care in full.
- From October 2021, a cap of £86,000 on lifetime contributions to care will be introduced.
- From October 2023, people with assets below £20,000 will not have to pay anything for care.
If you have assets over £100,000, you will be expected to fully fund your own care, but you will not be expected to pay more than the cap.
If you have assets between £20,000 and £100,000, you will be expected to contribute to your own care but you may receive government support. The level of which will depend on your finances.
Dividends
The current dividend tax rate will increase from 7.5% to 8.75% for basic rate tax payers, from 32.5% to 33.75% for higher rate tax payers and from 38.1% to 39.35% for additional rate tax payers.
State Pension
State pensions will also be increasing by the greater of inflation increase and 2.5% from April 2022, breaking the government manifesto pledge of a triple lock (being greater of 2.5%; inflation increase; salary increase) due to higher than expected salary growth due to the impact of the pandemic. This is a one year intervention with the normal increase in line with average earnings being reinstated from the 2023-2024 tax year onwards.
For further advice on any of the information contained in this article, please contact a
Moore adviser.