Today the government confirmed that there will be a new levy introduced to pay for the health and social care crisis that we are currently facing as a country. Although it has been announced as a simple 1.25% levy, there is a bit more to it. 

From April 2022 there will be an additional 1.25% added on top of National Insurance. This is both to the employee and the employer and the self employed. This method of collecting it is temporary, because HMRC do not have the ability to get their systems in place.

From April 2023 this charge will stop, NI will revert back to its former percentages and the increase will become its own tax fund. At this point it will be extended to workers of a pensionable age. 

In addition to the above, the government is also adding 1.25% to the rate of tax that individuals pay on dividends. 

So, if you are an employee, you will be charged an additional 1.25% per year on your gross pay.

If you are an employer, you will pay an additional 1.25% on all of your employees salaries (assuming they are already subject to NI). This is a cost that the employer bears ON TOP of gross salaries.