Recently it has been announced that a new “Social care levy” will be introduced at a rate of 1.25% on all employees and self-employed people from April 2022, with it also reaching workers above pensionable age from April 2023, who are currently exempt from National Insurance. Additionally, if you employ people and pay employers NIC, that too will go up by 1.25%. If you are a hard working director of your own small business that is just coming out of a national pandemic, paying yourself dividends, that tax rate also increases by 1.25%. Is now a good time to remind company directors (many of which lost out on any Covid related grants) that Corporation tax rates will also increase from April 2023 to a maximum 25% from 19%. I guess we knew it would come, but these measures could potentially be substantial for some businesses.

The latest “levy” will be shown separately on payslips from 2023, but probably will be included in National Insurance for a year while HMRC’s systems catch up. This means that people earning £24,000, less than the average wage, would pay an additional £260 a year for the levy. Anyone earning less than £9,680 will not have to pay the levy. A typical higher rate taxpayer earning £67,100 will contribute £715.

There are exemptions and lower limits, details of which at the time of writing are yet to become clear. This does however highlight the importance of tax planning. In past articles I have touched on various topics such as pensions, vehicles, VCT investments (need IFA advice) to name a few but as the tax burden will inevitably increase, we may need to think more pro-actively about our businesses and the choices we make.

By Simon Jilks FCCA, Ivybridge Accountants