So, Boris Johnson has finally announced his plan for Social Care funding.
From April 2022 National Insurance contributions and dividend tax rates will increase by 1.25 percent, with the projected £12bn annual income to be ring fenced to pay for health and social care.
The increase will apply to employed (including deemed employees) and self-employed individuals and partners earning above the class 1 primary threshold / class 4 lower profits limit (currently £9,568 in 2021/22).
Employers will pay the additional 1.25% for employees earning above the class 1 secondary threshold (currently £8,840 in 2021/22).
All existing reliefs and allowances from employer’s secondary class 1 NIC will apply to the levy including the £4,000 employment allowance, reliefs for employers of apprentices, newly employed veterans and new employees in freeports.
From April 2023:
The increases will be legislated separately as a “health and social care levy” and NIC rates will return to 2021/22 levels. The levy will be hypothecated in law, meaning that the revenues will be ringfenced for health and social care. From that date, the legislation will also extend the revenue raising measure to individuals over state pension age in employment, who are currently exempt from paying NIC.
Alongside the levy,
which will be paid by employees, the self-employed and businesses, the government has announced a 1.25% increase in dividend tax rates from 1 April 2022, taking rates to: 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers. The £2,000 dividend allowance will remain.
The Chancellor has also announced the date for the spending review to be published with the 21st October 2021 as the release date and a budget to follow on the 27th October 2021, so watch this space!!!
I hope you have found this useful, however please get in touch if you have any questions!