The Chancellor of the Exchequer has announced a series of forthcoming changes to taxation to fund health and social care. An HMRC policy paper on the levy can be read here. In summary:

• From April 2022, National Insurance will rise by 1.25 per cent. From 2023, the National Insurance increase will appear on people’s payslips as a “Health & Social Care levy”.
• The current 12% rate on earnings between £9,564 and £50,268 will rise to 13.25 per cent.
• The current 2% rate on earnings over £50,268 will rise to 3.25 per cent.
• Workers above state-pension age will also contribute to the new levy.
• Employers will be required to contribute an additional 1.25 per cent (employer National Insurance is currently 13.8 per cent)
• Anyone earning just under £10,000 will still be exempt.
• The Levy will apply UK-wide – a letter from the Prime Minister to the devolved administrations can be read here.

 The Levy is clearly going to result in increased costs for charities as employers. As many of you will be aware, the Employment Allowance is a helpful relief that currently entitles most charities a reduction in their secondary Class 1 NICs liabilities of up to £4,000 per year. The scope of this relief was narrowed in 2020 and restricts access to the Employment Allowance for a tax year to employers with secondary Class 1 NIC liabilities below £100,000 in the previous tax year. At present, no changes to the Employment Allowance have been announced to reflect the increase in NIC liabilities. CTG will be working with sector partners to consider ways to mitigate the impact of this levy on the charity sector and would welcome feedback from members including projections on the likely financial impact. Please send any comments to info@charitytaxgroup.org.uk.