National Insurance will rise to 13.5 percent in April, and retirees will face a new levy the following year.
Contributions to national insurance will rise later this year in order to help fund health and social care costs in the UK, affecting both employed and self-employed workers.
From April 2022 to April 2023, it will rise by 1.25 percent for a year before the 1.25 percent Health and Social Care levy kicks in, which pensioners will also have to pay.
The average worker will pay an extra £255 in taxes per year once the new National Insurance tax increase takes effect later this year.
In terms of dollars and cents, this means that an employee earning £20,000 per year will have to pay an additional £130.
On a £50,000 salary, higher earners would pay an additional £505.
Dividend tax rates, which are payments made by a corporation to its shareholders after deduction of corporation tax, are also set to rise by the same amount beginning in April in an effort to reduce the backlog in the state-run NHS.
Individuals who earn less than £9,564 per year, or £797 per month, will be exempt from the new levy.
From April 2023, the new Build Back Better government plan will impose a new Health and Social Care levy on all earned income, including a charge for those working beyond state pension age.
The government is attempting to raise £12 billion per year, or £36 billion over the next three years, to cover social costs.
As part of the levy, Scotland, Wales, and Northern Ireland will receive an extra £2.2 billion per year.
While the tax hike was not in the Conservatives’ original 2019 manifesto pledge, Prime Minister Boris Johnson stated that the new measures are necessary.
They are needed, he said, to relieve the strain that the Covid-19 pandemic has undoubtedly placed on the NHS.
Furthermore, from October 2023, anyone with assets under £20,000 will have their care costs fully covered by the government.
Those with assets of £20,000 to £100,000 will be expected to contribute to their costs, but will also receive government assistance.
Lower-paid employees have been cited as a source of concern.
Workers currently pay 12% National Insurance on earnings between £9,564 and £50,268; however, earnings above this threshold are taxed at a paltry 2% rate.
This means that as a person’s income exceeds £50,000, National Insurance becomes a smaller percentage of their pay.
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