What’s the new Health and Social Care levy and how are the self-employed affected?
What’s the new Health and Social Care levy and how are the self-employed affected?
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Self-employed lifestyle
23
September 2021

What’s the new Health and Social Care levy and how are the self-employed affected?

The prime minister has outlined his plans which have now been approved by MPs to increase National Insurance contributions to invest in health and social care across the UK over the next 3 years.

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The prime minister has outlined his plans which have now been approved by MPs to increase National Insurance contributions to invest in health and social care across the UK over the next 3 years. 

The bill is set to raise around £12 billion in extra funding per year, but what does this mean for self employed National Insurance contributions?

What is the change?

From April 2022, the government will introduce a 1.25% health and social care levy. The levy will increase National Insurance Contributions.

How will the levy affect me as a sole trader? 

The levy will apply to all individuals whether self employed or an employee. Here we outline specifically how this will impact self-employed sole traders. 

As a self-employed sole trader you pay two types of National Insurance; Class 2 and Class 4 NI (read more on NI here). The levy will be applied to Class 4 NICs only - Class 2 NIC are not impacted. 
Your 2021/22 Class 4 NIC will not change:

  • 9% on profits between £9,569 and £50,270
  • A further 2% on profits over £50,270

However from 2022/23, Class 4 NIC will be:

  • 10.25% on profits between £9,569 and £50,270
  • A further 3.25% on profits over £50,270

Let's look at an example of how this affects your available cash

If you’re a sole trader that has made a profit of £25,000 with no further sources of income, the personal allowance remains £12,570 and Class 2 NIC will remain the same. 

As we can see the total tax payable has increased by £193.
If you’re a sole trader with £55,000 profit.


The total tax payable has increased by £567.90. So really starting to impact available cash in the year.

How is this collected?

This will be calculated on the self assessment tax return and paid in the normal way.

Do you know about Making Tax Digital for Income Tax, which will cause some major changes to how sole traders manage and submit tax next year. Find out more by reading this blog.

What do you think of these changes? If you have any questions specific to your circumstances drop us a message in app. 


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