All you need to know about the Health and Social Care Levy

Did you know that National Insurance Contributions (NICs) are increasing this month to help pay for the NHS?

From 6 April, NICs will increase for employers, employees, and the self-employed.

The increase in contributions will specifically be used to help fund the NHS and health and social care and is called the Health and Social Care Levy.

It comes as the country aims to help bolster the health and social care system in the wake of the Covid-19 pandemic and increased demand for public services.

So, what are the changes and how will they affect you?

From 6 April 2022 to 5 April 2023, employer Class 1, employee Class 1, Class 1A, Class 1B, and Class 4 NICs will increase by 1.25 per cent for one year.

Then from 6 April 2023, National Insurance rates will return to 2021-2022 levels and the levy will become a separate new tax of 1.25 per cent.

From 6 April 2023, the new and separate levy of 1.25 per cent will apply to Class 1 contributions that are above the primary and secondary thresholds: Class 1A and 1B contributions for employers, and Class 4 contributions for the self-employed.

The levy will be collected by HM Revenue & Customs (HMRC) through the PAYE and self-assessment systems.

Meanwhile, existing NIC relief will continue for employees under the age of 21; apprentices under the age of 25; qualifying Freeport employees; those eligible for the Employment Allowance, and armed forces veterans.

Employers may also have to pay the separate levy for employees who are over the State Pension age from 6 April 2023.

So that employees can see where their increased NICs are going, HMRC is asking employers to include a message on payslips regarding the 1.25 per cent uplift and explain that it is being used to fund the NHS and social care.

However, from 6 April 2023, the new levy will have to be reported as a new item on payslips for employees who pay it.

Information on how to report the separate levy from next April will be available later this year, according to the Government.

For more details on changes to the tax and National Insurance system in the UK for businesses and employees, contact our expert team today.