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Health and Social Care Tax: How Much Extra Will You Pay?

On September 7th, 2021, the Government announced a rise in National Insurance and Dividend tax rates to help fund social care in England, and to help the NHS recover post-pandemic.

National Insurance Contributions (NIC’s)

How much are National Insurance Contributions going to increase by?

From 6 April 2022 to 5 April 2023, National Insurance contributions will increase by 1.25% and will be spent on the NHS and social care in the UK. 

Who will it apply to?

The increase will apply to: 

  • Class 1 (paid by employees) 
  • Class 4 (paid by self-employed)
  • Secondary Class 1, 1A and 1B (paid by employers)

The increase will not apply if you are over the State Pension age.

How will it be collected? 

It will be administered by HMRC and collected via Pay as You Earn and Self-Assessment. 

Exemptions

There will be exemptions to Class 2 self employed and Class 3 NICs, which are voluntary payments made to top-up state pension gaps, are not impacted by the levy. 

Health and Social Care Levy

From April 2023, the government will introduce the Health and Social Care levy, which will replace the National Insurance increase. This means the National Insurance rates will go back down to their current rate, but the Health and Social Care levy will be added in at 1.25%. This will be shown separately on your wage slip. This will be paid by all working adults, including workers over the state pension age. Again, this will be administered by HMRC and collected via the current channels for Pay as You Earn and Self-Assessment. 

*for 2021/22 tax year this applies to those who earn £9,568 – £50,270 per year

**for 2021/22 tax year this applies to those who earn over £50,270 per year

Annual salaryCurrent yearly paymentAdditional yearly payment
£20,000£1,251£130
£30,000£2,451£255
£40,000£3,651£380
£80,000£5,479£808
£100,000£5,878£1,130

Examples of how it will affect employees on varying salaries:

Dividend tax rates

How much is it going to increase by? 

From April 2022 dividend tax rates will rise by 1.25%. 

Who will it apply to? 

This is the tax on money earned from shares you hold in a company.

Basic rate taxpayersHigher rate taxpayersAdditional rate taxpayers
Dividend tax rates 2021/227.5%32.5%38.1%
Dividend tax rates 2022/238.75%33.75%39.35%

How will it be collected?

It will remain being collected through Self-Assessment.

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