Tax Changes Could Benefit You!

As you may already know, National Insurance payments are increasing in April, to fund social care in England and help the NHS recover from the Coronavirus pandemic.

Prior to the chancellors speech, anybody earning more than £9,880 a year would have paid 1.25p more in the pound on National Insurance. Following on from chancellors announcement, it has now been confirmed that you will in fact pay less tax than before if you earn less than £34,000 per year.

How is National Insurance changing and what is the Health and Social Care Levy?

Employees, employers and the self-employed will all pay 1.25p more in the pound for National Insurance (NI) 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

The extra tax will be collected as a new Health and Social Care Levy. This levy – unlike National Insurance – will also be paid by state pensioners who are still working.

How much will the tax changes cost me?

  • Combining those two measures means that in the next 12 months, anyone earning less than about £34,000 will pay less National Insurance than they did last year and anybody earning more than that will pay more.
  • An employee on £20,000 a year, for example, will pay approximately £178 less National Insurance in 2022-23 than they did the previous year.
  • Someone on £50,000 will pay £197 more.

What is the tax increase for?

  • Initially, the extra money will go towards easing pressure on the NHS.
  • A proportion will then be moved into the social care system.
  • This mainly helps older people and people with high care needs, with tasks such as washing, dressing, eating and taking medication.
  • The aim is to make sure people in England pay no more than £86,000 in care costs from October 2023 (not including accommodation and food).
  • Anyone with assets – like their home, savings and investments – worth less than £20,000 will have their care fully covered by the state.
  • Those with between £20,000 and £100,000 in assets will have their care costs subsidised.