Boris Johnson has today announced a 1.25% health and social care tax across the UK to help the NHS recover from the Covid pandemic. This will initially be collected via a 1.25% rise in National Insurance from April 2022.
This will be payable on the earnings of all working adults, including those over state pension age and will be payable by both the employee and the employer and so will apply to both Class 1 National Insurance Contributions (paid by the employee), secondary Class 1 National Insurance Contributions (paid by employers), along with Class 4 National Insurance Contributions (paid by the self-employed).
From April 2023 this will then become a separate tax on earned income (the Health and Social Care Levy) and National Insurance will return back to the current rates.
Individuals earning below the primary threshold (currently £9,568) will not be affected by the increase and so will continue to be exempt from National Insurance, along with the Levy.
Dividend income will also see a 1.25% tax increase on dividends received above the dividend allowance of £2,000. Investors may therefore be more encouraged to use tax free saving environments, such as ISAs and pension funds, now that the highest rate of dividend tax will increase to 39.35%. Those who can control the timing of dividend receipts may wish to bring forward any dividend payments to before the rate increase.
If you have any queries on how these tax increases will impact you or your business please contact us.