It’s almost two years since the start of the pandemic which has had a major impact on our working life; business, personal, and public finances – and health.

The NHS and social care system and resources have been stretched beyond capacity on many fronts. And one of the ways the government has responded, in order to assist the financing of the NHS and social care, is through the raising of a levy.


What Levy is the government raising?

The National Insurance levy will impact your Payroll, from April 2022. This NI levy is the 1.25% levy that is being raised via an increase to NICs (National Insurance Contributions).

This will affect your accounting and payroll, but you still have time to prepare for it. Our WinPay accounting software team are here to help you do this.


Who does the NI levy apply to?

This will impact Class 1 (employee and employer), Class 1A, Class 1B, and Class 4 (self-employed).

For full information, go to gov.uk to see if this affects your business employees.

( https://www.gov.uk/government/publications/health-and-social-care-levy/health-and-social-care-levy )


When will it revert back to the current rates?

In April 2023, the NI levy will revert back to its current rates, and the health and social care levy will be separated out on its own.

“The transitional increase to the main and additional rates of National Insurance contributions will take effect from 6 April 2022 and will last for the 2022 to 2023 tax year only. The new Health and Social Care Levy will take effect from 6 April 2023,” says gov.uk website.

In real terms, this means that for any employer and employee affected by the levy increase, it still is an added amount – whether it is the temporary NI levy for one year, or the subsequent new Health and Social Care Levy that follows in 2023.


New Health and Social Care Levy – from April 2023

The new 1.25% Health and Social Care Levy is where the revenue will be ringfenced to support UK health and social care bodies.

This new Levy will be subject to the same reliefs, thresholds and requirements of the qualifying National Insurance contribution (Class 1, Class 1A, Class 1B or Class 4) in respect of which the Levy is payable.

This means that payroll software will need to reflect both of these updates in due time.


How has this increase in National Insurance come about?

This Health and Social Care Levy through raising National Insurance has come as a result of the vast costs and pressures of Covid-19 on our NHS and social care.


What do businesses and payroll accounting software need to do?

This measure is expected to have a significant impact on over 1.6 million employers who will be required to introduce this change.

One-off costs will include familiarisation with the change and could also include updating software or systems to reflect the change.

“A further one-off cost could include updating employee payroll records to reflect this change. This measure will also impact payroll software providers who will have one-off cost of familiarisation and will also be required to update software to reflect this change, the cost of which may be passed onto customers.”

Our Compact team who expertly help our clients navigate their specific payroll needs are here to assist.