Business Round-up
Government announces rise in NICs to fund new Health and Social Care Levy
National insurance contributions (NICs) and dividend tax rates will rise by 1.25% in 2022 to fund a new health and social care package. The increase is put on a permanent footing from 6 April 2023 as a separate tax, the Health and Social Care Levy. NIC rates then revert to current levels. Workers over state pension age, who are currently exempt from NICs, will be liable to the Levy – but not the temporary increase in NICs.
From 6 April 2022, NICs rise by 1.25% for employees (Class 1 contributions), the self-employed (Class 4 contributions) and employers (Class 1, 1A and 1B secondary contributions). Also from April 2022, dividend rates rise to 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers. These measures apply to all the UK, and have particular impact on higher earners in Scotland.
The proposals bring major changes to the way social care is funded in England. They mean that from October 2023, no eligible person starting adult social care should contribute more than £86,000 over their lifetime. Where assets are less than £20,000, contributions may be required from income, but not savings or the value of the home. Means-tested support will be available where assets fall between £20,000 and £100,000. Social care is funded differently elsewhere in the UK.
HMRC outlines changes to late payment penalty regime
HMRC has published a paper outlining the changes to the late payment penalty regime for taxpayers. Initially the changes will apply to VAT and income tax self assessment (ITSA). The changes will see interest charges and repayment interest harmonised to bring VAT in line with other tax regimes, including ITSA.
Under the new regime, there are two late payment penalties that may apply: a first penalty and then an additional or second penalty, with an annualised penalty rate. All taxpayers, regardless of the tax regime, have a legal obligation to pay their tax by the due date for that tax. The taxpayer will not incur a penalty if the outstanding tax is paid within the first 15 days after the due date. If tax remains unpaid after day 15, the taxpayer incurs the first penalty.
The changes will apply to VAT taxpayers for accounting periods beginning on or after 1 April 2022; to ITSA taxpayers with business or property income over £10,000 per year (who are mandated for Making Tax Digital for ITSA (MTD for ITSA)) from the tax year beginning 6 April 2024; and for all other ITSA taxpayers from the tax year beginning 6 April 2025.
