What is the new Health & Social Care tax and how will it affect me?

National Insurance is a UK-wide tax, and although Boris Johnson's November announcement focuses on funding Health and Social Care in England. Scotland, Wales and Northern Ireland will also receive £2.2 billion to spend on their services.

The government has announced an extra tax to fund social care in England which will go towards helping the NHS recover after the pandemic. The new tax has faced criticism - including from within the Conservative Party - that it will be unfair on younger people and the lower-paid.

So what are the new plans?

Employees, employers, and their self-employed will all pay 1.25p more in the pound from April 2022.

• Employees pay NI on their wages
• Employers also pay extra NI contributions for staff
• The self-employed pay NI on their profits

This will change from April 2023, however, when National Insurance will return to it's current rate and the extra tax will be collected as a new Health and Social Care Levy which will also be paid by state pensioners who are still working.

What are the criticisms of the tax increase?

Currently, workers pay 12% NI on earnings between £9,564 and £50,268. However, there is a 2% rate increase for anything earned above this. But as your income rises above £50,000, NI becomes a smaller proportion of your wage.

What is the tax increase for?

Effectively, the 1.25% rise is going to towards funding health and social care, but the government initially expects to raise £12 billion a year which will go towards easing pressure on the NHS. A percentage will subsequently be moved into the social care system over the next 3 years.

For more information on rates and thresholds for employers, click here

More information regarding self assessment tax returns can be found here