I have had a number of enquiries asking for the reasoning behind the recent Health and Social Care Levy.
I have spoken with some of my colleagues at the Treasury about its introduction, and I understand that they viewed this measure as one which was difficult but necessary to undertake. The decision to raise taxes was not taken lightly, but it will mean that we can address the challenges facing health and social care in the UK following the coronavirus pandemic.
The HSCL will be effectively introduced from April 2022 when NICs for working-age employees, self-employed, and employers will increase by 1.25 per cent. The Levy will be legislatively separated from 2023 when NICs rates will return to 2021-22 levels. Dividend tax rates will also be increased by 1.25 per cent to fund the Plan for Health and Social Care.
It is worth noting that there are some exemptions to the Levy, which is applied at a flat rate of 1.25 per cent. People earning less than the Primary Threshold / Lower Profits Limit in 2021-22 will not pay the Levy, and the Levy will not apply to Class 2 or 3 NICs. This means that the highest 14 per cent of earners will be paying around half the revenues of the Levy, and that no one earning less than £9,568 will pay a penny.
Unlike Income Tax or VAT, an increase in NICs ensures businesses contribute alongside employees and the self-employed.
The HSCL will apply to individuals working above State Pension age from April 2023. I appreciate that this will be frustrating for many. I have conveyed the strength of feeling about this to colleagues at the Treasury, who assure me that this small contribution is a necessary and extraordinary one to tackle the pressures on our health and social care system following the pandemic.