National Insurance supports people who are ill or unemployed, including funding the NHS, benefits and the state pension
From April 2022 National Insurance Contributions (NICs) for both employers and employees will increase to fund social care and help to clear NHS backlogs. 
 
This temporary new charge will be replaced in April 2023 by a Health and Social Care Levy
 
National Insurance was introduced more than a century ago to support working people if they lost their income due to illness or unemployment. Now it also pays for the NHS, benefits, and your state pension. 
 
As an employee you will pay NICs if you are over 16 and earn more than £184 per week or if you are self-employed and make a profit of £6,515 or more per year. If you continue to be employed above the state retirement age of 66 you don’t currently pay NICs. 
 
Until April your NICs will be 12% of your earnings between £9,564 and £50,268, and 2% above the top threshold. 

How the NIC increases will work 

Employers are responsible for deducting income tax and NICs from their employees’ wages. They must also pay employer NICs. 
 
Employee and employer contributions will be increasing by 1.25% from April 2022. The rate for employers will be 15.05% on relevant earnings and for employees the new rate will be 13.25% and 3.25% above the top earning threshold. 
 
For employees the new rate of NICs will be deducted from pay. The total amount you pay will depend on how much you earn and your type of employment. 
 
If you are self-employed these changes will be taken into account in your Self Assessment Tax calculations. 
 
In addition, there will also be a 1.25% increase in taxes on dividend income from April 2022. The government says that this is to make sure that business owners and investors who receive income as dividends rather than earnings will also contribute. However, other income such as rent from property won’t be affected. 
 

The Health and Social Care Levy 

The new Levy of 1.25% from April 2023 will apply to employees, employers and self-employed people. It will work in the same way as NICs but will also apply to the earnings of those who continue to work when they are over state pension age who don’t currently pay NICs. 
 
The government says the Levy will apply to employees and employers liable for Class 1 NICs and self-employed people who pay Class 4 NICs. It’s anticipated it will raise around £12.4 billion a year for health and social care. 
 

What happens after 2025? 

It’s not yet clear what will happen with the funds raised by the Levy after 2025, when the NHS backlog should have been cleared. It is expected that the funds will be used only for social care in the UK. 
 
If you would like to discuss implementing the new NICs for 2022 and the new Levy from 2023, please get in touch. 
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