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Please note that this is preliminary guidance, so may be subject to change.

 

What is the aim of the Social Care Levy?

  • To support the NHS.
  • To fund reforming social care and create a new integrated system between health and social care focussed on improving outcomes across all four nations of the UK. 
  • Note – the devolved governments of Northern Ireland, Scotland and Wales will decide how they will apply the funds arising from their share of the Levy. 

How will the Social Care Levy be collected?

  • On employed earnings it will be collected through the PAYE system. 
  • Initially, due to administrative constraints, from April 2022, it will be included within the employers and employees national insurance (NIC) rates and reflected as such on the employee’s payslip. 
  • From April 2023, the Levy will be separated out from the NIC and shown separately on the employee’s payslip.
  • If you are self-employed the 1.25% will be included in your Class 4 NIC payments. From April 2022 the Levy will likely to be payable in January and July each year. 
  • For most self-employed, the likely first payment date may be 31 January 2024, unless you are over state pensionable age, in which case the first payment maybe as late as 31 January 2025. 
  • If you pay tax on dividends, the Levy will be added to the present dividend rates.
  • Depending on your overall circumstances the Levy on the dividends may be payable either:
    (a)  In January and possibly July each year. The first payment date maybe 31 January 2024
    OR
    (b) You could request for the tax be collected through your PAYE code number during the tax year itself or, in some cases, during the following tax year.  
  • As regards benefits, the Class1A additional amount will need to be paid by 19 July following the end of the tax year. 

When will the Social Care Levy first be applied?

  • In respect of earned income, from 6 April 2022, unless you are a worker over state pensionable age, in which case from 6 April 2023.
  • As regards dividend income, from 6 April 2022.

What will be the new rates from April 2022?

  • Employers NIC will increase from 13.8% to 15.05% on earnings above £8,840.
  • Employees NIC will increase from 12% to 13.25% on earnings between £9,568 and £50,270.
  • Employees NIC will increase from 2% to 3.25% on earnings in excess of £50,270.
  • Where your total income is not more than £50,270, the dividend rate will increase from 7.5% to 8.75%.
  • Where your total income is between £50,271 and £150,000, the dividend rate will increase from 32.5% to 33.75%.
  • Where your total income is in excess of £150,000, the dividend rate will increase from 38.1% to 39.35%.
What could be the financial impact of the Social Care Levy?
  • Individual earning £20,000 – Additional cost £130. Employer cost £140.
  • Individual earning £50,000 – Additional cost £505. Employer cost £515.
  • Individual earning £100,000 – Additional cost £1,130. Employer cost £1,140.
  • Individual in receipt of a dividend of £20,000 – Additional cost £225.
  • Individual in receipt of a dividend of £50,000 – Additional cost £600.

When will the Social Care Levy not apply?

  • Self-employed Class 2 NIC and the voluntary Class 3 NIC.
  • As regards individuals, earnings below the employees NIC threshold presently set at £9,568). For employers, the NIC threshold is currently at £8,840.
  • If your dividends are covered by your personal allowance (£12,570) and/or the tax free dividend allowance of £2,000.
  • Businesses who are employing apprentices under the age of 25, as long as their gross yearly income is less than £50,270.
  • Businesses who are employing anybody under the age of 21, as long as their gross yearly income is less than £50,270.
  • Businesses who are employing veterans from the armed forces where they are entitled to employers NIC veterans relief, as long as their gross yearly income is less than £50,270.
  • Employers operating within Freeports, where they are eligible for employers NIC relief in respect of employing new employees, as long as their gross yearly income does not exceed £25,000.
  • Dividends in an ISA will not be affected.
  • The employment allowance (currently £4,000) can be offset against the Levy.  
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Added By: Sharon Worger on 09th Sep 2021 - 16:38
Last Updated: 09th Sep 2021 - 17:18

Number of Views: 31
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