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NICs rates to increase by 1.25%
A new health and social care tax is being introduced to boost funding for the NHS and social care, Prime Minister Boris Johnson announced.
Employees and the self-employed will initially pay an extra 1.25% in National Insurance contributions (NICs) from April 2022.
From April 2023, this rate will remain in place but in the form of a ‘health and social care tax', at which point state pensioners who continue to work will also pay the levy.
Employees currently pay 12% in Class 1 NICs on earnings between £9,568 and £50,270, and 2% on earnings above that, while employers pay a flat rate of 13.8%.
The self-employed will also see Class 4 NICs rates rise, with the main rate of 9% increasing to 10.25% and the higher rate from 2% to 3.25%.
The increase in NICs stands to generate an additional £12 billion for health and social care.
The Chartered Institute of Taxation (CIOT) said that bringing state pensioners into scope of the new levy might be setting a precendent for the future.
John Cullinane, director of public policy at the CIOT, said:
"The new levy (NICs in all but name) will apply to pensioners, albeit limited to their employment income.
"It is hard not to see this as setting a precedent making it easier to bring pensioner earnings within the full scope of National Insurance at some point in the future."
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