What is it?
The launch of a social care levy from 2022 will see all working taxpayers having a 1.25% tax charge under new government plans, while dividend tax will also rise. Initially the change will come in as increased National Insurance contributions, and from April 2023 it will be deducted from earnings as its own separate tax.
The additional 1.25% tax charge will also be paid by employers.
Who is it for?
This will affect employers, employees, self-employed and those that receive dividends.
How does it work?
The tax will be raised through a 1.25% point rise in National Insurance from April 2022. This is a 1.25% rise in employees National Insurance, Class 4 (self- employed National Insurance) and employers National Insurance.
From April 2023, the increases will become a new tax ‘the health and social care levy’.
What should I do next?
Employers should be planning how this rise in employers National Insurance affects their business and cash flow projections.
For self-employed and company owners, a review of how each business owner’s remuneration will be taxed should be undertaken so they can understand if their business structure is still beneficial. This is very important for business owners who operate via a limited company where they are likely to have a planned remuneration strategy.
If you would like our help with these changes, don't hesitate to get in touch with Ian Timms, our Tax Partner.
First published 10 September 2021
Last Updated 10 September 2021
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