Impending changes to National Insurance Contributions: what the Health & Social Care Levy means for you

From 6th April 2022, employees and employers alike will be subject to an increase in National Insurance Contributions from 12% to 13.25%.

In September last year, the government announced the changes – titled the Health & Social Care Levy – as a means of raising £36billion in the next three years to fund care across the UK.

From this April, employees will see a rise in their National Insurance Contributions in their payslips, which will be displayed as an increase of 1.25 percentage points to their usual payments. While this may seem like a minimal increase in contributions, the percentage points equate to a more than 10% rise when it comes to actual financials. For example, if a tax bill was £1,000 at 12%, a tax of 13.25% (adding the 1.25 percentage point increase) would leave you with an updated payment of £1,104.17.

The same increase will apply to businesses paying National Insurance when calculating their deductibles.

Then, from April 2023 onwards, National Insurance rates will decrease to 2021-2022 tax year levels and be replaced by a new, separately-listed 1.25% Health & Social Care Levy.

The increase this year, and subsequent levy next year, mean business costs are on the rise. Additionally, while many employees will benefit from an upcoming increase in national living wage from April, higher rates of pay come with higher rates of National Insurance Contributions.

We’re sharing this information now, so you have plenty of time to make the changes required within your business to meet the new expectations. If you’re an existing Champion payroll client, our payroll team are on hand to help update your systems for employee salaries, while our accounting and advisory experts can work with you to identify where potential savings could be made elsewhere to cover the increase in payments for your company.

To discuss the Health & Social Care Levy with our team, don’t hesitate to contact your local Champion office.