The UK government has announced tax hikes to fund a Health and Social Care Levy. This means a National Insurance increase in 2022.

NHS ambulance illustration

What is National Insurance?

If you are an employee in the UK over the age of 16, earning £184 a week or more, you have to make a mandatory welfare contribution known as National Insurance (or NI). If you are self-employed, you will need to pay once you are making a profit of £6,515 or more a year. You stop paying once you reach State Pension age.

National Insurance funds bereavement benefits, unemployment benefits (the dole), statutory sick pay, Jobseeker’s Allowance and a UK State Pension.

Your contributions are tracked through a National Insurance number, which also functions as a tax number. If you work in the UK without a NI number, you pay a higher tax rate, so it’s important to apply for an NI number as soon as you arrive in the UK.

What’s the new Health and Social Care tax?

The UK government aims to raise £12 billion a year through a new tax. This money will go towards a social care system, which will largely help older people who can no longer care for themselves.

With the current system you have to prove that you have a high level of need and you’re only able to claim social care if you have a net worth of less than £23,250. The government will only cover the full amount if you have assets and savings less than £14,250.

This system has left the National Health Service (NHS) in a difficult position as it cannot discharge people from hospital if they have nowhere to go. Those in need who are not poor enough to qualify for social care, but who do not have enough to afford private care, are currently getting stuck within the hospital system. The issue is only compounding as the UK’s population ages.

The new tax will be a separate Health and Social Care Levy from 2023 that will subsidise care costs for those who have between £20,000 and £100,000 and will provide full cover for those who have below £20,000.

From April 2022 until April 2023 this levy will form part of National Insurance.

How much more National Insurance will I have to pay?

In the current system you’d pay 12% on earnings between £9,568 and £50,270, and 2% on any income above £50,270. Here’s how National Insurance payments will be impacted by a rise of 1.25%:

What you earn*What you’d pay in 2021IncreaseWhat you’ll pay in 2022
£50,000 £4,851£505£5,356

*Annual salary | Source: BBC

The increase will not apply if you are over State Pension age.

Moving to the UK? Take the stress out of the process and hit the ground running when you arrive. Download your free UK Relocation Pack here.

We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you'll do so with the backing of experienced local experts.