All of the rates of NIC for the following NIC classes are increasing by 1.25 percentage points from 6 April 2022:
- Class 1 (primary and secondary)
- Class 1A
- Class 1B
- Class 4
Tables of the proposed rates are found in the technical annex to the policy paper on the Health and Social Care Levy. Classes 2 and 3 NIC are not affected.
The draft provisions to increase these NIC rates are included in the Health and Social Care Levy Bill 2021, which has already passed its House of Commons stages in Parliament, so is likely to become law very shortly.
That Bill makes it clear that the increase in NIC will only apply for one tax year: 2022/23, as from 6 April 2023 the Health and Social Care (HSC) Levy will take the place of the top 1.25% of NIC in all cases. However, the state pension age restriction for classes 1 and 4 NIC will not apply to the HSC levy, so that tax will be payable by pensioners who are still working as employees or self-employed after 5 April 2023, if they earn over the primary threshold of £9,568 per year.
Where the employer pays a zero rate of class 1 NIC on employees’ wages up to the secondary threshold (£50,270pa) the HSC levy won’t be payable by the employer on those wages. This zero rate of secondary class 1 NIC applies for employees in these categories:
- Anyone aged under 21
- Apprentices aged under 25
- Ex-forces personnel in their first civilian role for up to 12 months
From April 2022 a zero rate of secondary class 1 NIC will be available on up to £25,000 of each employee’s wages who works for least 60% of their time in a tax Freeport. It follows that the HSC levy will not be payable by the employer on that lower band of earnings for Freeport employees.
HMRC has stated that the Employment Allowance can be set against the increased secondary class 1 NIC for 2022/23, but what is not clear is whether the Employment Allowance will be available to set against the HSC levy from 2023. The Employment Allowance is not mentioned in the Health and Social Care Levy Bill 2021, but relief may be provided by regulations made after the Act is passed.
Written by the Tax Advice Network