Further to the announcement made by the chancellor the new social care levy will be introduced starting from April 2023, for the interim this tax will be collected by increasing the National insurance contributions by 1.25% from April 2022. The new levy will affect Employers, employees and the self-employed who are liable to pay National Insurance contributions and individuals that would be liable to pay National Insurance contributions were it not for pension age restrictions. Individuals who only pay Class 2 and Class 3 National Insurance contributions will not be affected.
UK taxes on income has mainly been two folds, income tax and national insurance. The main rate of national insurance paid by employees has more than doubled since 1977, rising from 5.75% to 13.25% from next April, while the basic rate of income tax has been cut from 34% to 20%.
From 6 April 2022 to 5 April 2023 National Insurance contributions will increase by 1.25%. This will be spent on the NHS and social care in the UK. From April 2023, National Insurance will return to its current rate, and the extra tax will be collected as a new Health and Social Care Levy.
For Those Employed
Those employed pay National Insurance Class 1 contribution. The amount deducted will depend on the gross income earned. National insurance contributions are deducted directly by the employer before you receive your pay. The below chat will give you an idea of how much more tax you will pay as a result of the new levy.
| Annual Salary | Additional yearly tax deducted |
| £ 20,000 | £ 130 |
| £ 30,000 | £ 255 |
| £ 50,000 | £ 505 |
| £ 80,000 | £ 880 |
| £100,000 | £ 1,130 |
For Businesses
If you’re an employer, the rate changes could make the process of hiring staff more expensive. Employers pay a percentage of Class 1 National Insurance for each employee, depending on how much they get paid. This could raise recruitment challenges or cause businesses to try to make savings elsewhere
Business Owners
From April 2022 tax on dividend income will increase by 1.25% to help support the NHS and social care.
| Tax Band | Current Rates | New Rates |
| Basic rate | 7.5% | 8.75% |
| Higher rate | 32.50% | 33.75% |
| Additional rate | 38.10% | 39.35% |
The new levy is expected to raise £ 12 billion per year and a proportion will then be moved into the social care system over the next three years. This mainly helps older people and people with high care needs, with tasks such as washing, dressing, eating, and taking medication.
The aim is to make sure that people in England pay no more than £86,000 in care costs from October 2023 (not including accommodation and food).
At present, to get your care paid for by your local council, you must have a very high level of need and also savings and assets worth less than £23,250 in England. Below that level, the amount you pay reduces until you have less than £14,250, at which point the council pays for your care if you qualify.
The care system is under pressure because of an ageing population and the pandemic. It has been hit by staff shortages and falling government spending. This has also put pressure on the NHS because people cannot be discharged from the hospital if they don’t have anywhere suitable to go.
If you are concerned or would like to know more about the impact of the new levy please get in touch with us, our friendly team is always happy to help. 0208 249 6007
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Written by Quraish Adamally