This week has been one of huge change in the UK with the announcements made by the Prime Minister on the 7th of September around further support and funds for both NHS and Social care support in the form of a new Levy for Health and Social Care. It has been a difficult 2 years due to the pandemic increasing borrowing and costs to ensure the UK comes through the crisis and as such the government have had to change direction from original plans not to increase tax and National Insurance to increasing individual and employer statutory deductions in the form of the new levy which initially will form part of the National Insurance deductions. The announcement therefore confirmed the new levy will be a “two-stage” change with an effective date of the 6th of April 2022.
The first stage therefore for 2022/23 will see an increase in most forms of National Insurance through a 1.25% increase to the current levels with no cap. For employees this means 13.25% up to the Upper Earnings Limit then 3.25% after. For employers the NI contributions increase to 15.05%. The same 1.25% increase will also be added to Class 1A and 1B employer costs and class 4 contributions for the self-employed.
Employers are being encouraged to include a payslip message to show that the increase in NICs relates to the Health and Social Care Levy. It was also confirmed that the levy amount can be offset against the employment allowance for those eligible.
From April 2023, the UK National Insurance rates will revert back down to the current percentages and rates while the Health and Social Care Levy will become a stand-alone deduction at the percentages discussed previously and as such will be shown and reported separately on payslips and employers RTI and other returns such as the P11Db. The new levy once separated will also be chargeable to those over the State Pension Age who are in employment. It has been confirmed that the stand-alone levy will still be linked to National Insurance thresholds but there is still clarity required around other areas such as the Freeport and Veterans NI holidays.
Employers will receive further information and detail on the changes over the coming months.
Below is a chart showing the changes to come into effect.