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Government to fast-track rules enacting healthcare levy

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Published: 10 Sep 2021 Update History

Legislation enacting the health and social care levy is set to to be voted through by MPs just seven days after the new tax was announced.

A little over 24 hours after the Prime Minister’s announcement of plans for a new tax, the 1.25% health and social care levy  (HSCL), a new bill was laid before parliament.

Although legislation for new taxes usually takes time to enact, the Chancellor has lost no time in setting the new HSCL on track. After MPs completed their first reading on 8 September, The Health and Social Care Levy Bill has been scheduled to go through all remaining stages of its passage through the House of Commons on Tuesday 14 September just seven days after the levy’s announcement.

Realistically, there wouldn’t have been enough time to allow IT systems to be changed and payroll software to be amended before 2023, so the HSCL itself will become law from 6 April 2023.

As an interim measure, from 6 April 2022 all existing rates of national insurance contributions (NIC) will increase by 1.25% for just one year. This applies across the board and affects the self-employed class 4 rate, all employee rates, including the 2% paid by higher earners for earnings which will rise to 3.25%, as well as all employers’ NIC rates (standard, class 1A and class 1B).

From April 2022, employers will be asked to include a special message on payslips to emphasise that the national insurance rise is for the HSCL. From April 2023, the HSCL will be shown as a separate deduction on employee payslips.

When the HSCL does apply in April 2023, the levy will also apply to workers (employed and self-employed) above the state pension age, although the temporary increase from April 2022 does not.

Meanwhile, the announced increase to dividend tax rates by 1.25% from April 2022will be legislated in the next Finance Bill and is not covered by The Health and Social Care Levy Bill.

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