Health and Social Care levy

The Government has announced a temporary increase in national insurance contributions (NICs) and dividend tax rates, this will increase by 1.25 percentage points across the UK from April 2022, this will affect both employed and self-employed workers. Shareholder(s) receiving dividends will also be affected.

From 2023, the health and social care levy element will then be separated out and the exact amount employees pay will be visible on their pay slips. It will be paid by all working adults, including workers over the state pension age – unlike other NICs.

This increase will apply to class 1 NICs paid by employees and class 4 NICs paid by self-employed workers. Class 2 self-employed NICs and class 3 NICs, which are voluntary payments made to top-up state pension gaps, are not impacted by the levy. The levy will also not be taken from pension income.

Dividend tax rates will rise by 1.25 percentage points from April 2022. This is a tax on money given to you by a company you hold shares in, usually when it’s made a profit. For those in the basic-rate band, this will increase from 7.5% to 8.75%, those in the higher-rate band from 32.5% to 33.75% and those additional rate band from 38.1% to 39.35%.

As always, we will ensure as part of our service to you that you are compliant with all changes in regulation; whilst also maintaining tax efficiency so you don’t overpay tax. If you have any questions regarding the above or any other matters, feel free to contact us on [email protected].