The National Insurance (NI) rise to fund the Health and Social Care Levy by former Chancellor Rishi Sunak, has been reversed by his successor Kwasi Kwarteng in September’s mini-Budget.
The levy was expected to raise approximately £13 billion a year to fund health and social care services. That figure will be maintained at the same level as if the levy was in place, says the Government.
Workers and employers have been paying an extra 1.25p in the pound NI to fund social care since April this year. It was planned for the NI rate to revert to the previous level next April
It would then have been replaced by the Health and Social Care Levy at a rate of 1.25 per cent.
Savings ‘will fund investment’
Now NI contributions will be cut from 6 November and the planned levy for next year will be cancelled, as has the increase in dividend tax.
It means 28 million people across the UK will keep an extra £330 a year, on average, in 2023-24.
When will people receive the extra cash?
Most employees will receive payment directly in November via their payroll, but some payroll software systems may have problems and in that case, some will get the pay backdated in December 2022 or January 2023.
If staff have no joy with their employer, there may be circumstances where individuals may need to apply to HMRC for a refund.
How are the self-employed affected?
Taking into account the changes in rates throughout the year, self-employed people and company directors will pay a blended rate of National Insurance when they submit their annual self-assessment return.
What about dividends tax?
Also from April 2023, the Government is reversing the 1.25 percentage point increase to the rate of income tax on dividends which took effect in April 2022.
Dividends can generate a regular income from your investments. But, as with any income you earn, you may have to pay tax.
For help and advice on related matters, please contact our team today.
