22/23 Tax Year: 1.25% Health and Social Care Levy

How is payroll impacted by the new national insurance levy?

On the 7th of September 2021 the Prime Minister announced a 1.25% health and social care levy on earned income, which will come into effect in April 2022. Speaking to the House of Commons, Boris Johnson declared that this additional levy was required in order to raise funds for health and social care across the UK.

Speaking about the National Health Service, the Prime Minster said “Covid has put enormous pressure on the NHS” and in order to not only “tackle Covid backlogs” but to also reform an already struggling service, a record investment would be required. The additional levy is expected to raise £36 billion over three years.

New information for payslips

HMRC is asking employers, where appropriate, to include the following message on payslips:

‘1.25% uplift in NICs, funds NHS, health & social care’.

How will the new health and social care levy be introduced?

In April 2022, the 1.25% levy will be raised via a temporary increase to the National Insurance Contributions (NICs). This will impact Class 1 (employee and employer), Class 1A, Class 1B, and Class 4 (self-employed). In April 2023, the NI will revert back to its current rates and the health and social care levy will be separated out on its own.

Who will be affected by the 1.25% levy?

The new levy will then be paid by all working adults and will also include those above the state pension age who are still working. The exception is those earning less than £9,564 a year or £797 a month, who don't pay National Insurance and won't have to pay the new levy.

What does this mean for payroll?

This will first be reflected on an employee’s payslip with an increase to their NIC deduction, and then in April 2023 the new levy will be introduced as a separate deduction on the payslip.