What does the Heath and Social Care Levy mean for your business?

On the 7th September the UK Government let us know about how they are going to fund the extra money needed to fund Social Care and the NHS going forward. The additional funds will come from an increase in National Insurance contributions from individuals and businesses, as well as an increase on the tax on dividends. So, what does this mean for you, your business and your employees?


What are the Changes?

In April 2022, National Insurance contributions (NICs) will increase by 1.25%. this will be for employees, employers and the self-employed.  This will cover both Class 1 (employee and employer), Class 1A and 1B and Class 4 (self-employed) NICs.


Those above State Pension Age are not impacted by the April 2022 changes.


From April 2023, a new Health and Social Care Levy of 1.25% will be introduced which will apply to those who pay Class 1 (employee and employer), Class 1A and 1B and Class 4 (self-employed) NICs.  When the new levy comes into effect, the National Insurance rates will go back down to the current levels.


One additional change in April 2023 will be that the levy will also apply to anyone above State Pension age with employment income or profits from self-employment above £9,568.


The government will also increase the rate of income tax on dividends by 1.25% from April 2022, covering Company Directors who take their earnings as income and dividends.


It means that everyone will effectively see a decrease in their income – whether from salary or dividends, and that businesses will pay a higher level of Employer contributions.


How will it be administered?

The increase will be administered by HMRC and collected through the current reporting and collection procedures for NICs – so basically the Pay As You Earn (PAYE) system, and the annual Income Tax Self Assessment return for self-employed and Company Directors.

It will apply UK-wide, with no difference depending on which part of the UK you live in.


How to make sure your payroll is correct.

Payroll software can help make sure you are paying your employees correctly. It also makes sure that the levels of taxation and NI contributions are correct, and that payslips show all the amounts correctly.  There will also be certain wording that will need to be added to payslips, which can all be done for you.


How can we help?

The team here at Choice Bookkeeping are on hand to help with all your bookkeeping, accounting and payroll needs. If you are struggling with payroll, or are looking to take staff on and don't know where to start, we can help set you and your business up on suitable software for managing your accounts, as well as making payroll simple and easy each week or month. We offer a free consultation, and are based right here in Haverfordwest.