National Insurance and income taxes increased to pay for a new social care levy

The Government have today announced the introduction of a new Health and Social Care Levy based on National Insurance Contributions. The purpose of the change is to ringfence and fund investment in health and social care. The changes are expected to raise over £12bn per year for the Treasury.

The proposal as presented by Prime Minister, Boris Johnson, outline that from 6 April 2022 all levels of National Insurance, being employee’s, employer’s and class 4 (for the self-employed), will increase by 1.25%.

From April 2023, once HMRC’s systems have been updated, the 1.25% levy will be formally separated from National Insurance and will also apply to any individual who is above the State Pension age but still working. At the moment, any individual above the State Pension age who is still in employment or is trading as a self-employed individual, does not pay any National Insurance.

The increases are illustrated in the table below:

Employee Employer Self-employed
Main / higher rate Main / higher rate
Current NICs rates (2021-22) 12% / 2% 13.80% 9% / 2%
2022-23 NICs rates 13.25% / 3.25% 15.05% 10.25% / 3.25%
2023-24 NICs rates 12% / 2% 13/8% 9% / 2%
Levy 1.25% 1.25% 1.25%
Charged on all earnings/profits above: (2021-22 thresholds) £9,568 £8,840 £9,568

Mr Johnson also announced that the Government will also increase all of the rates of income tax on dividend income by 1.25% from 6 April 2022. The changes of which are summarised below:

Basic Rate Higher Rate Additional Rate
Current dividend tax rates (2021-22) 7.50% 32.50% 38.10%
2022-23 dividend tax rates 8.75% 33.75% 39.35%

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