Businesses, employed people and pensioners who are still working must all prepare to pay more tax, after the Government announced its plans to boost funds for the NHS and increase spending on social care.
From April 2022, National Insurance will increase by 1.25 per cent for businesses, employees and the self-employed.
Then from April 2023, it will return to its former level and the new Health and Social Care Levy will be introduced, also at 1.25 per cent. This will be paid by businesses, their employees and the self-employed and also by working pensioners, who cease to pay National Insurance once they reach retirement age.
Those earning less than £9,564 won’t have to pay National Insurance or the new levy.
Prime Minister Boris Johnson admitted the tax rise breaks a Tory party manifesto promise not to increase taxes, adding a “global pandemic was in no-one’s manifesto”.
Income from share dividends – earned by those who own shares in companies – will also see a 1.25 per cent tax rate increase.
The need to raise funds comes as no surprise in the wake of the pandemic, but what we didn’t know until the announcement was how this would be managed, whether through more borrowing, raising taxes or both.
Any tax rises have an impact, and we believe most people expected some kind of increase to help the NHS after the pandemic. It seems the Government decided that increasing National Insurance, which is felt by businesses and individuals alike, was the most palatable option.
Our advice always is to plan ahead. This change is coming in, in April 2022, which gives eight months for businesses to adjust their budgets to take into account the National Insurance increase.
For more help with tax planning or accountancy services, please get in touch with the accountancy team. We work with businesses, people and families in Swindon, Cheltenham, and the surrounding area.