The new Health and Social Care Tax

This week has brought us news that the UK’s tax burden is set to hit its highest level since 1950 aided by the new UK-wide Health and Social Care Levy to be introduced initially in April 2022 through a 1.25 percentage point increase in Class 1 and Class 4 NICs, therefore representing an additional cost for employees, employers and the self-employed alike.

From April 2023, and once HMRC systems have been updated, the levy will then realise independence so to speak, being separated out and properly reflected as a separate legal charge, in the process also being levied on individuals working above State Pension age, which is unlike NIC, the rates of which will return to their current levels.

Existing NIC reliefs for employers employing people under 21, apprentices under 25, certain veterans and for employers in Freeports will however still apply and may therefore mitigate the cost of the levy for some, as does the £4,000 Employment allowance, which it is estimated means that some 40% of all employers will not need to pay it.

Of course, not everyone draws their income from a business as earnings and in an attempt to spread the load more fairly, the government intends at the same time (April 2022) to further fund health and social care through also charging shareholders an additional 1.25 percentage point on their dividends.

In terms of the levy however, the overall impact on business and the jobs market remains to be seen, as recovery from the impacts of the pandemic are inevitably accompanied by some fragility. Factoring it into the budgeting and decision-making process in relation to the workforce is however important for employers, as indeed may be the design of remuneration structures which might, for instance, incorporate certain share based incentives and/or benefits with low or nil NIC cost.

For further information please contact your usual Larking Gowen contact. You can find contact details on the Our People section of the Larking Gowen website. Alternatively, call 0330 024 0888 or email enquiry@larking-gowen.co.uk.

John Weston