The Health and Social Care Reform (now scrapped from April 2023)

This week the government announced changes and reforms to the social care system and how these reforms would be paid for.

The reforms are to be funded by way of a new Health and Social Care Levy to begin from April 22.  Due to the time it will take HMRC to get the systems in place to operate the Social Care Levy for the year 2022/23, this will be collected by way of increased national insurance contributions payable by employees, employers and self-employed.  This will be a temporary measure and from April 2023 the Health and Social Care Levy will be a separate charge payable by employees, employers and the self-employed. Unlike National Insurance, which is not payable by those over state pension age, this will apply to all working/self-employed individuals no matter what their age.

The separation of the Levy from tax and national insurance enables this to be ring fenced and put directly towards health and social care. The cynical might also say that it is a way for the government to claim that it hasn’t actually raised national insurance and also enable future governments to raise revenue without technically increasing tax or national insurance.

In addition to the Health and Social care Levy the additional tax charged on dividends will also increase by 1.25% from April 2022.

What will this mean for you?

All employees and self-employed individuals will pay an additional 1.25% on their earnings over the national insurance threshold, currently £797 per month, to HMRC. Employers will have an automatic increase in staff costs of 1.25% on all employees' salaries over and above the threshold of £737 per month.  For example and employee on a salary of £30,000 per year will pay an additional £255.40 of contributions per year and the cost to the employer will Increase by £264.50.  For owner managed businesses where the owner receives a salary, this is effectively a double whammy with an increase in cost of 2.5%.

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Visit HMRC’s website for more information.

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