Professional November 2021

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A new health and social care levy – what we know so far

GemmaMullisMCIPP, CIPP policy and research officer, gives the lowdown on the health and social care levy, discussingwhat payroll professionals should expect in the years to come

W hile payroll professionals minister, Boris Johnson, gave us a treat of his own – the announcement that payroll professionals will be required to pull up their sleeves and tackle processing a newly announced health and social care levy. What is the tax? Speculation was rife in the weeks leading to the official announcement that National around the UK were celebrating National Payroll Week, the prime Insurance contributions (NICs) would increase. This was to raise funds needed by the National Health Service (NHS) and the social care sector. The prime minister made the announcement on 7 September 2021, advising Parliament of the introduction of a new tax, which in tax year 2022/23, would see a temporary increase of 1.25% to both the main and additional rates of class 1, class 1A, class 1B and class 4 NICs. In tax year 2023/24, NIC rates will revert to those applicable in 2021/22 and

15.05%. As the increase is encapsulated within the class 1A calculation, the levy will be processed in the same manner – via a P11DB in the following tax year (2023/24). The same will apply when payment of class 1B NICs are calculated in relation to expenses processed via a PAYE settlement agreement (PSA). There will be an increase for those who are liable to play class 4 NICs, namely those who are self-employed. This will see class 4 NICs rise to 10.25% on profits between £9,569 and £50,270 and 3.25% on profits thereafter. The prime minister made the announcement on 7 September 2021, advising Parliament of the introduction of a new tax...

the levy (at the same rate of 1.25%) will be paid and processed in isolation.

What does this mean for the payroll industry? Payroll professionals are no strangers to ever-evolving legislation and guidance, however, it seemed appropriate to split the changes over the two tax years that will be most affected. Tax year 2022/23 In tax year 2022/23, all systems will need to be developed and updated to reflect the additional 1.25% increase to the NIC calculation. The increase in NIC rates will result in employees who earn above the primary threshold to the upper earnings limit (UEL) paying 13.25% in NIC contributions, with those above the UEL paying at a rate of 3.25%. Employer class 1 NICs will also increase to 15.05% based on an employee’s NICable earnings above the secondary threshold. In addition, any benefits provided that attract class 1A NICs which are awarded in the tax year 2022/23 will be increased to

Employee class 1 NICs

Employer class 1, 1A & 1B NICs

Self-employed class 4 NICs

Tax Year 2021/22 Tax Year 2022/23

12% / 2%

13.8%

9% / 2%

13.25% / 3.25%

15.05%

10.25% / 3.25%

| Professional in Payroll, Pensions and Reward | November 2021 | Issue 75 50

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