This is how much National Insurance you will pay after tax hike to fund social care

By Fionnula Hainey

The government has announced a new health and social care levy to pay for social care reforms and to address the NHS patient backlog.

Almost £36 billion will be invested in health and social care over the next three years to help the NHS recover from the coronavirus pandemic and reform the adult social care system so people no longer face catastrophic care costs.

A UK-wide 1.25 per cent health and social care levy based on National Insurance (NI) contributions will be introduced from April - and the money raised will be ring-fenced for health and social care.

READ MORE :

Boris Johnson outlined the new plans for social care which include introducing a cap of £86,000 on lifetime care costs from October 2023, which will protect people from the “catastrophic fear of losing everything”.

The government will fully cover the cost of care for those with assets under £20,000, and contribute to the cost of care for those with assets between £20,000 and £100,000.

In addition to the health and social care levy, there will also be a 1.25 percentage point increase in the dividend tax, to ensure those who receive their income from shares also contribute.

Most of the money raised by the new levy in the first three years will go towards the NHS, and is expected to fund an extra nine million checks, scans and operations, as well as help the NHS focus on innovation.

But what does the tax hike mean for workers' payslips?

Additional contributions made as part of the health and social care levy will eventually be shown on wage slips.

Initially, main rate NI contributions will increase by 1.25 percentage points from 12% to 13.25% from April 2022, as systems are updated.

From 2023, the health and social care levy element will then be separated out and the exact amount employees pay will be visible on their pay slips.

It will be paid by all working adults, including those over the state pension age, unlike other National Insurance contributions.

A typical basic-rate taxpayer earning £24,100 will contribute around £180 extra in 2022-23, while a typical higher-rate taxpayer earning £67,100 will contribute £715.

Someone on a £50,000 salary, meanwhile, could pay just over £500 more in annual NI contributions next year, while an earner on £20,000 could pay an extra £130.

A worker on £100,000 could see their contributions increase by more than £1,000 next year while someone on £30,000 could see contributions increase by around £250.

The government said the progressive nature of the levy meant that 6.2 million people earning less than a threshold of £9,568 in 2021-22 will not pay the levy.

According to Treasury modelling, in 2022-23, more than a third of the overall tax increases and over half the increase in dividend tax rates will come from the top 10% of households, with the majority coming from the top 20% of households.

Treasury documents say lower-income households will be large net beneficiaries, with the poorest households gaining most as a proportion of income.


What is inkl?

Important stories

See news based on value, not advertising potential. Get the latest news from around the world.

Trusted newsrooms

We bring you reliable news from the world’s most experienced journalists in the most trusted newsrooms.

Ad-free reading

Read without interruptions, distractions or intrusions of privacy.