National Insurance and tax increases to fund social care - can you plan to minimise?

The Government has provided details of the increases in National Insurance (“NIC”) and tax rates it will impose in order to generate funding for social care and the NHS.

Dated: 9 September 2021 Author: James Hunt, Employment Services Senior Manager

You may be able to take steps now to minimise some of the increases, further details below.

From April 2022:

  • Increase in the rates of NIC by 1.25% on earnings, employee benefits and self-employed profits. For employed staff it will mean a reduction in net pay, for employers it will mean an increase in liabilities on both salaries and employee benefits
  • Increase in the rate of tax on dividends by 1.25%

From April 2023:

  • The NIC increase will change to a separate charge on earned income, to be shown on payslips as a Health and Social Care Levy. The Levy will be extended to include state pension age workers, who do not currently pay NIC on their earnings

Now is the time to plan ahead, by using tools such as Salary Exchange for Pensions, to reduce the impact of the salary related NIC increases, as shown in the tables below.

To demonstrate the impact of the changes, we have created company examples which are based on 100 employees, earning an average of £30,000 per annum and employees paying pension contributions based on 5% of gross pay. This is based on current NIC bandwidths.

Table

Table


The changes could make quite an impact on the costs to your business and we would be more than happy to discuss ways to manage this strategically.

Take Action Now

Please contact us to discuss this further by calling 0800 298 3899 or simply complete our enquiry form.  Don’t wait, take advice now, we are here to help you.