Thank you for contacting me about the Health and Social Care Levy
I have spoken with my colleagues at the Treasury about the introduction of a Health and Social Care Levy (HSCL), and I understand that they view this measure as a difficult but necessary one. The decision to raise taxes was not taken lightly, but it will mean that we can tackle the challenges facing health and social care in the UK following the Covid-19 pandemic. I know that Government ministers, as well as MPs, discussed at length a number of possible ways in which social care could be funded, including insurance and pension type schemes, but this would have cost individuals much more. The Levy on NIC is considered the most fair way of raising the necessary funding.
The HSCL is ringfenced for social care, and will be effectively introduced from April 2022 when NICs for working age employees, the self-employed, and employers will increase by 1.25 per cent. The Levy will be legislatively separated from 2023 when NICs rates will return to 2021-22 levels. Dividend tax rates (dividend earned from stocks and shares) will also be increased by 1.25 per cent to fund the Plan for Health and Social Care.
It is worth noting that that there are some exemptions to the Levy, which is applied at a flat rate of 1.25 per cent. People earning less than the Primary Threshold/Lower Profits Limit in 2021-22 will not pay the Levy, and the Levy will not apply to Class 2 or 3 NICs. This means that the highest 14 per cent of earners will be paying around half the revenues of the Levy, and that no-one earning less than £9,568 will pay a penny towards it.
Unlike Income Tax or VAT, an increase in NICs ensures that businesses also contribute alongside employees and the self-employed.
People who need and provide care deserve a fundamentally better deal that the current arrangements provide.
Thank you again for taking the time to contact me about this important matter.
Sally-Ann Hart MP