Henry Pettitt, Partner at Stephenson Smart in Great Yarmouth, explains how the Government’s tax changes and new plan for supporting the UK’S health and social care system will work.
How will the government’s tax changes from next April affect you?
On 8 September we witnessed one of the biggest announcements to date since the beginning of the pandemic, with tax changes agreed to fund £12bn a year to support the NHS and social care backlog across the UK.
From April 2022 National Insurance contributions (NICs) will increase by 1.25pc for one year only for employees, employers and the self-employed.
This will cover both Class 1 (employee and employer), Class 1A and 1B and Class 4 (self-employed) contributions, although State Pension Age are not impacted by the April 2022 changes.
Essentially if you earn more, you will pay more.
From 2022/23, if you earn around £24,100 you will have to pay in the region of £180 extra in National Insurance, while someone earning £67,000 will contribute another £715.
Health and Social Care Levy
From April 2023 the National Insurance contribution rates will decrease back to the levels of 2021/2022, with the introduction of a new Health and Social Care Levy.
The new ring-fenced levy of 1.25pc will apply to those who pay Class 1 (employee and employer), Class 1A and 1B and Class 4 (self-employed) NICs.
It will also be extended to those over State Pension age who are in work, with employment income or profits from self-employment above £9.568.
The levy will be administered by HMRC and collected through the current reporting and collection procedures for NICs – Pay As You Earn and Income Tax Self-Assessment.
The government will also increase the rate of income tax paid by people who receive dividend income from shares by 1.25% from April 2022.
These tax changes are all part of the need for a long-term solution to funding health and social care, allowing everyone to pool and share risks and resources.
You can read the government’s Plan for Health and Social Care here.
Please contact us if we can help you to plan for these forthcoming tax changes to National Insurance contributions and Income Tax.
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