UK: National Insurance Contributions to Increase by 1.25% to Fund Health and Social Care

UK: National Insurance Contributions to Increase by 1.25% to Fund Health and Social Care

On Tuesday 7th September 2021, following speculation that the government was intending to increase National Insurance contributions, the Prime Minister confirmed that a new ‘Health and Social Care Levy’ will be introduced, increasing the rate of National Insurance by 1.25%.

A new social care package, which has been described by the Prime Minister as “the biggest catch-up programme” in the history of the NHS, will be funded through the new, UK-wide 1.25% health and social care levy and will be effective from April 2022. From this date, dividend tax will also increase by 1.25%.

The levy will also cover the reform of the social care system in England in a bid to end the “unpredictable” and “catastrophic” care costs faced by many. Those above state pension age but still in employment will also be required to contribute to the levy, as will the self-employed and employers.

From April 2023, the 1.25% levy will be formally separated out and will also apply to individuals working above State Pension age, and National Insurance Contribution rates will return to their 2021-22 levels.

Although the money in England is earmarked for recovering from Covid-19 and the social care reforms, tax changes affect the whole of the United Kingdom. Scotland, Wales and Northern Ireland will also receive an additional £2.2 billion a year that will be directed into each nation's health service.

Further information can be found here.

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