Reversal of the Health and Social Care Levy

It was on 7 September 2021 that we first heard about a new 1.25% Health and Social Care Levy, imposed on employers, employees and the self-employed, coming in from 2023/24. Further, this was to be effectively accelerated into 2022/23 by a 1.25 percentage point rise in National Insurance contributions (NICs). As expected, and despite changes to thresholds earlier this year, the increased NIC rates have resulted in a reduction in take home pay for many individuals.

The Health and Social Care Levy has now been abolished and will not come in next April.

This will be delivered in two parts:

• • The government will reduce National Insurance rates from 6 November 2022, in effect removing the temporary 1.25 percentage point increase for the remainder of the 2022-23 tax year;
  • The 1.25% Health and Social Care Levy will not come into force as a separate tax from 6 April 2023 as previously planned.

What does this mean for the self-employed?

Self-employed people and company directors will pay a blended rate of National Insurance – taking into account the changes in rates throughout the year – when they submit their annual self-assessment return.

What is happening to income tax on dividends?

From April 2023 the government is reversing the 1.25 percentage point increase to the rate of income tax on dividends which took effect in April 2022. This move is designed to support entrepreneurs and investors as we seek to raise living standards through economic growth.