Health and Social Care Levy Update

On the 7 September 2021, Prime Minister Boris Johnson announced plans to provide an additional £12 billion per year for health and social care on average over the next three years, to be funded by a new, UK-wide 1.25 per cent Health and Social Care Levy (the Levy), to be introduced from April 2022. 

Key points are as follows:-

  • The Levy is to be based on National Insurance contributions (NICs), and means that from next April, the government will ask businesses, employees and the self-employed to pay an extra 1.25% on earnings.  The government will also increase dividend tax rates by the same amount.
  • In 2022/23 the Levy will be collected by means of an increase in the current rates of NICs by 1.25 per cent. In 2023/24 a formal legal surcharge (levy) of 1.25% will replace the increase in NICs rates (and the underlying NIC rates will return to their previous level).
  • From 2023, people over the age of 66 will be asked to pay the Levy on their earnings too.
  • The government said that in 2022-23, a typical basic rate taxpayer earning the median basic-rate taxpayer’s income of £24,100 would pay an extra £180 in National Insurance, while a typical higher-rate taxpayer earning the median higher rate taxpayer’s income of £67,100 would be expected to pay an extra £715.
  • The funds from the levy will be ringfenced to fund investment in health and social care.  There will also be a number of reforms to how people pay for adult social care in England, including the introduction of a cap on personal care costs of £86,000 from October 2023.
  • The Chancellor Rishi Sunak has said there are 3 reasons for the increase in taxes:
    • Properly funding the NHS as we recover from the pandemic.
    • To collectively share the financial costs of social care
    • To fund the Government’s vision for the future of health and social care.
  • There will be a snap House of Commons vote on the proposed Levy today (Wednesday).

The policy paper is available here:

The PM’s statement to the House of Commons yesterday is available here:

The Chancellor’s announcement is available here:

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