The Health and Social Care Levy (HSCL), announced in September 2021, is part of the long term solution to fund health and social care. To fund the permanent increase in spending on health and social care, the government has increased taxation. In the first year this increase in tax is collected by an increase in National Insurance Contributions (NICs) and from April 2023, NICs will return to their original level and the HSCL will be collected as a separate tax.
Here is a summary of what you need to know, as an employer or if you are self employed, to prepare for the changes.
- For the tax year 6 April 2022 to 5 April 2023 Employer Class 1, Employee Class 1, Class 1A, Class 1B and Class 4 National Insurance contributions will increase, for one year, by 1.25%.
- From 6 April 2023 the National Insurance contribution rates will go back down to 2021 to 2022 levels, and the levy will become a separate new tax of 1.25%. The tax will be payable by pensioners, albeit limited to their employment income.
Employers
If you are an employer paying Class 1, Class 1A or Class 1B National Insurance Contributions (NICs) you will need to start paying the 1.25% increase in NICs from 6 April and then the separate levy from 6 April 2023. You may also have to pay the separate levy from 6 April 2023 for employees who are over the State Pension age. Existing employer reliefs and allowances that apply to NICs will also apply to the levy.
HMRC is asking employers, where appropriate to include the following message on payslips.
“1.25% uplift in NICs, funds NHS, health and social care”.
From April 2023 the levy will need to be reported as a new item through Real Time Information (RTI) and shown as a separate 1.25% levy on payslips.
Self employed
If you are self-employed and have profits greater than the Lower Profits Limit for Class 4 NICs, you will be required to pay the additional 1.25% NIC for 2022/2023 and the separate 1.25% levy from April 2023.
If you reach the State Pension age in the tax year 6 April 2022 to 5 April 2023 with profits more than the Lower Profit Limit, you will have to pay the 1.25% because you will continue to pay Class 4 NICs until the end of the tax year in which you reach State Pension age.
From April 2023, as a self-employed person you will pay the Health and Social Care Levy as you would other taxes, using Self-Assessment.
If we take care of your Payroll, we will be making sure that you are paying the correct level of NICs, reflecting the additional 1.25% in NICs in 2022/23 and that the levy is collected from April 2023.
If you are considering outsourcing your payroll, talk to us about the service we can offer, entirely without obligation.