• Olga

Health & Social care levy - our tax bill is going up from April 22

On 8th September a health & social care levy bill was voted through the first stage of Parliament. While it is still subject to change, here's a summary of what the bill means for you.

What is the levy? The levy is an additional 1.25% charge on all earnings, benefits, PAYE settlement agreements and dividends. How will the levy affect me?

  • Starting April 2022, the additional 1.25% charge will be collected through PAYE as part of National Insurance Contribution (NIC) then from April 2023, the levy will be shown separately from NIC.

  • The levy will be included in class 4 NIC payments, it will likely be payable in January and July each year.

  • If you are paying tax on dividends, the levy will be included in addition to present dividend rates.

Why is the levy being introduced?

To support the NHS and to fund reforming social care. The levy will create a new integrated system between health and social care, focused on improving outcomes throughout the UK. When will the levy be applied? The levy will be collected, in respect of earned income and dividend income, from April 6th 2022, unless you are a worker over state-pensionable age, in which case, from April 2023. Circumstances where the levy doesn't apply

  • Doesn't apply to pensionable income

  • Self-employed class 2 NICs and voluntary class 3 NICs

  • Dividends from an ISA

  • Income below the employee NIC threshold of £9,568, for employers, the NIC threshold of £8,840

  • Dividends that are covered by £12,570 personal allowance and/or the tax-free dividend allowance of £2,000

  • Businesses employing apprentices under the age of 25, as long as their gross yearly income is less than £50,270

  • Businesses that are employing armed forces veterans, as long as their gross yearly income is less than £50,270

  • Employers operating within Freeports, where they are eligible for employers NIC relief in respect of employing new employees, as long as their gross yearly income doesn't exceed £25,000.

  • Employment allowance of £4,000 can be offset against the levy.

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