You and The Social Care Levy

As the new payroll year approaches and the levy is about to be introduced here are the changes and how they’ll affect you:

National Insurance contributions are to increase by 1.25% for one year only for employees, employers and the self-employed from April 2022. This will cover both Class 1, (employee and employer), Class 1A and 1B and Class 4 (self-employed) National Insurance contributions.

From April 2023, a new ring fenced Health and Social Care Levy of 1.25% will be introduced if you pay Class 1 (employee and employer), Class 1A and 1B and Class 4 (self-employed) National Insurance contributions it will apply to you and will also be extended to those over State Pension age who are in work. When the new Levy comes into effect, National Insurance rates will revert back to current levels.

The Levy will also apply to individuals above State Pension age with employment income or profits from self-employment above £9,568. The Levy will not be charged on pension income, and those over State Pension age who are neither in work nor self-employed. The Levy will be administered by HMRC and collected through the current reporting and collection procedures for National Insurance contributions, PAYE and Income Tax self-assessment.

• Like National Insurance, Levy contributions will apply UK-wide, and people will pay the same in England, Scotland, Wales and Northern Ireland.
• From 2023 to 2024, Levy contributions will appear as a separate item on payslips.
• A generic message will also appear on employees’ payslips in the next tax year (2022 to 2023):
• 1.25% uplift in NICs funds NHS, health & social care
• The Levy will also apply to secondary Class 1 National Insurance contributions. Existing National Insurance contributions reliefs and allowances will apply to the Levy.

How to calculate the increase:

For the tax year 2022-23, national insurance contributions will increase by 1.25% for anyone earning more than £9,568 per annum.

For example, for someone who earns £20,000 per annum, their National Insurance Contribution (NIC) is currently is £104.36 per month. With the increased 1.25% from April 2022, their NIC will be £115.23 per month, and the monthly difference of £10.87 will result in a NIC increase of £130.44 per annum.

• For earnings of £30,000K per annum, NIC increase will be £255
• For earnings of £50,000K per annum, NIC increase will be £505
• For earnings of £80,000K per annum, NIC increase will be £880
• For earnings of £100,000K per annum, NIC increase will be £1130

From April 2023 National Insurance will then return to its current rate and a new health and social care tax will be introduced that will apply to both employers and employees. You will need to notify your employees that the levy will be applied to their pay documents.

For example, for someone who earns £30,000K per annum, the employer’s NIC is currently is £243.29 per month. With the increased 1.25% from Apr 2022, the NIC will be £265.33 per month and the monthly difference of £22.04 will result in a NIC increase of £264.45 per annum.

Example for an annual salary of £30,000:

NIC difference per month:

Employees = £21.29

Employers = £22.04

NIC difference per annum:

Employees = £255.45

Employers = £264.45

When taking the example of a medium sized company with 250 employees, with an average annual salary of £30,000, employers NIC alone would increase by £66,112.50 per annum.

For more information on how this will affect you as an employer our office number is 01482 210876, call us today for a no obligation quote for payroll and pension processes.