It is well documented both in the news and the finance industry that the government is introducing a Health ad Social Care levy at 1.25% on 06/04/2022.
This increase will apply to working NIC credits for employed and the self employed. In addition, shareholding dividend directors will also get hit with an extra 1.25% levy.
This will mean many employees paying 13.25% (was 12%) on band earnings between £190 per week (increases to £242 per week 6th July 2022) and £967 per week and 3.25% (was 2%) on earnings above this.
Employers, unless it falls within the total NICS employment allowance (£5,000 pa), will be paying 15.05% (was 13.80%) on all weekly earnings above £175 per week.
Salary Sacrifice 2022/23
By offering or requesting a salary sacrifice i.e., reducing your salary by e.g., £100 pm, £200pm or more and having this gross amount paid by your employer into your pension scheme, you will save significant sums on not just your own national insurance contributions of 13.25% or 3.25% at the top end but also income tax payments. In addition, where applicable, your employer may also save up to 15.05%. The pension contribution is paid gross by your employer and your employer may even pay extra into your pension given they have saved on employer’s national insurance contributions.
Health and Social Care Levy 2023/24
In 2023/24, national insurance contribution rates will fall back to their old levels and a separate, new Health and Social Care levy will apply to all workers, including those over state pension age that are no longer liable to national insurance contributions. We do not know exactly yet how this would work with salary sacrifice but our best guess is that it will not work as it is a separate levy rather the current temporary increase to national insurance rates. That said, even savings at the old NIC rates of 12% and 2% (employees) and 13.80% employers will still make salary sacrifice attractive.
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