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Health and Social Care Levy

Nick Irvin, Manager, Employment Tax and Andy Hamman, Director, Employment Tax
08/09/2021
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The government has today announced a new Health and Social Care Levy to pay for reforms to the care sector and NHS funding in England.

The levy will apply from April 2022, although will operate slightly differently in 2022–23 compared to future tax years.

From April 2022, the levy will see an increase of 1.25% on the rates of:

  • Class 1 Primary and Secondary National Insurance Contributions – paid by employees and employers on gross wages, respectively
  • Class 1A and Class 1B Contributions – paid by employers on benefits provided to employees
  • Class 4 National Insurance Contributions – paid by the self-employed on profits.

In 2022–23, this will operate as a simple increase of the National Insurance Contributions rates, so only those liable to pay National Insurance Contributions will be subject to the levy.

From 2023–24 onwards, once HMRC have developed new systems, the levy will operate as a separate payment to National Insurance Contributions, and it will also apply to those above the State Pension age, which is currently not the case for Class 1 Primary and Class 4 National Insurance Contributions. However, existing reliefs for Class 1 Secondary National Insurance Contributions will also apply to the new levy for employers of apprentices under the age of 25, all employees under the age of 21, veterans, and new employees in Freeports (from April 2022). The levy deduction will appear separately on employee payslips.

In addition, there will also be 1.25% added to the rate of income tax charged on dividends.

What do employers need to do?

From an employer perspective, the effective increase in Class 1 Secondary National Insurance Contributions means that employment costs will increase. It is important that employers assess the impact of this increase on their employment costs and assess how it can be funded. Alternatively, employers may wish to consider other means of remunerating their employees, for example, through tax-efficient benefits, which would not be subject to the levy.

How Crowe can help

We would be happy to help organisations assess the impact the Health and Social Care Levy will have on your organisation and discuss any suitable tax-efficient alternatives for remunerating your employees. Please get in contact with Andy Hamman or your usual Crowe contact.

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Contact us

Andy Hamman
Andy Hamman
Director, Employment Tax
London