National Insurance Rises “Care Levy”
(or what I personally consider the cost of covid).
I imagine a lot of you will feel, like me, this is unjust, unfair and not what was promised in the manifesto. Clients have asked me, how will this affect me? What can I do to avoid it? Well here’s everything you need to know:
The rise comes into effect from April 2022
Employees, employers and the self-employed will all pay 1.25p more in the pound for National Insurance (NI) on earnings above £9,564
- Employees will pay NI on their wages
- Employers also pay extra NI contributions for staff (if this goes above the employer's levy)
- The self-employed pay NI on their profits
- Dividends will attract an additional 1.25%
But from April 2023, National Insurance will return to its current rate, and 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.
The increase will see an employee on £20,000 a year pay an extra £130. Someone on £50,000 will pay £505 more
Employee’s: Anyone earning under £9,564 will not be affected
How can you avoid it? Well, unless you are going to reduce your income to under £9,564 - you can’t. However, there are ways you can mitigate the effect. If you’re planning on hiring new staff, 2 part-timers will attract far less NI than a full-time worker. Now’s the time to go through all your costs and ask “Am I getting value for money?” Can you switch providers and get a better deal?
Alternatively, can you increase your market share or increase your income another way? Covid has hit many businesses hard, the landscape is going to become more competitive.
It’s time to be innovative and diversify. Strengthen your loyal customer base.
You can find more information on the health and social care levy below:
https://www.gov.uk/government/publications/health-and-social-care-levy/health-and-social-care-levy
