Health and Social Care Levy announced
After a period of over two years since first announcing, in July 2019, that he had a plan to ‘fix the broken care system, the Prime Minister announced yesterday more details and how it would be funded. To fund their investment in this sector the Government has announced the following tax rises
From April 2022
1.25% increase in National Insurance Contributions (NICs) that will be payable by employers, employees and the self-employed
1.25% increase in income tax on dividends
From April 2023
Employees of pension age will also pay a 1.25% levy, although at that point all contributions will be recorded as being paid towards the Health and Social Care Levy.
What Should You Do
Now For many owner managers, now is an appropriate time to consider how they are extracting funds from their business and whether action should be taken now to ensure that their future extractions are still tax efficient. For those holding a share portfolio that is subject to tax, they may wish to consider investing into tax efficient investments such as ISA’s or pensions that will remain tax free on dividends received after April 2022.
For employers, they may want to consider discussing with their employees now whether their existing remuneration structure should be adjusted, so that they can be rewarded with tax efficient benefits that will not attract NIC. As the prime Minister did not discount the possibility of further tax rises, this levy could be the first of further tax changes to enable the deficit to be paid down. Interestingly, we have not yet seen any specific tax charges imposed on the self-employed which was mooted at the time Covid assistance was offered to them. The Chancellor’s Spending Review and Autumn Budget on 27 October will tell us more.
Our coronavirus knowledge centre has information on the Government’s full range of COVID-19 support schemes, including the Coronavirus Job Retention Scheme, Self-Employment Income Support Scheme (both due to end on 30 September) and Recovery Loan Scheme. We are also pleased to help you with any specific guidance: please get in touch.
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