Search Legislation

Advanced Search

Health And Social Care Levy Act 2021

Contents

Commentary on provisions of Act

Section 1: Health and Social Care Levy

  1. Section 1(1) states that every person who is liable to pay a qualifying National Insurance contribution, or would be liable if the pension age restrictions are ignored, will also be liable to pay a new tax. This tax is to be known as the Health and Social Care Levy (Section 1(2)). This tax will be charged on the same amount of earnings (for employees and employers) or profits (for the self-employed) that the contribution is payable on. It will be equal to 1.25% of the amount of earnings or profits.
  2. Section 1(3) defines "qualifying National Insurance contribution" as:
    1. Primary Class 1 contributions (employees),
    2. Secondary Class 1 contributions (employers),
    3. Class 1A contributions (employers),
    4. Class 1B contributions (employers),
    5. Class 4 contributions (self-employed).
  3. Section 1(4) specifies the "pension age restriction provisions" that are to be ignored for the purpose of this Levy are any provisions made by or under any enactment that provides for an exemption from liability to pay a qualifying National Insurance contribution by reference to a person having attained pensionable age.
  4. Section 1(5) specifies that when determining the amount of the Levy chargeable in relation to a contribution, where the relevant percentage in respect of secondary Class 1 contributions is 0%, those earnings are to be ignored. This means that where relief is provided from secondary Class 1 contributions by way of a 0% rate (for example, in relation to certain apprentices), that relief will also apply to the Levy.
  5. Section 1(6) stipulates that the new Levy will have effect in relation to qualifying National Insurance contributions payable on or after 6 April 2023.

Section 2: Destination of proceeds of Health and Social Care Levy

  1. Section 2(2) states that the proceeds (including relevant penalties and interest) from this new levy will be paid by HMRC to the Secretary of State towards the cost of health and social care in England, Wales, Scotland and Northern Ireland. Section 2(2) provides the Treasury with a discretionary power to determine the share of the Levy between health and social care and the share that each nation will receive.
  2. Section 2(1) allows HMRC to deduct expenses associated with the collection of the health and social care levy, or recovering any relevant penalties or interest, from the amount paid to the Secretary of State.
  3. Section 2(3) clarifies that "relevant penalties or interest" means penalties and interest that arise in connection with the Health and Social Care Levy to the extent that they can be attributed to the Levy.
  4. Section 2(4) requires HMRC to pay any amounts deducted under Section 2(1) into the Consolidated Fund.

Section 3: Application of national insurance contributions legislation

  1. Section 3(1) states that, for the purpose of operating the Levy, any provisions that apply in relation to a qualifying National Insurance contribution will also apply to the Levy payment corresponding to the contribution.
  2. Section 3(2) provides examples of provisions that may apply in relation to the Levy. These include:
    1. information, accounting and reporting requirements,
    2. assessment, collection and payment requirements,
    3. rights of appeal,
    4. administration, penalties or interest, and
    5. priority of amounts owed to HMRC in cases of insolvency.
  3. However, Section 3(3) specifies that provisions relating to a person’s entitlement to benefits or limiting the maximum amount of National Insurance contributions that are payable do not apply to the Levy. This means that payment of the new Health and Social Care Levy does not give rise to entitlement to contributory benefits.
  4. Section 3(4) makes the application of legislation by subsection (1) subject to other provision made by this Act, or by regulations made under this Act, and to any necessary modifications (including any modifications necessary to secure the payment of the Levy by individuals to whom the pension age restrictions provisions apply).

Section 4: Regulations

  1. Section 4(1) provides the Treasury with regulation-making powers to make general provision for the purposes of the Health and Social Care Levy.
  2. Section 4(2) provides examples of provisions that may be made under Section 4(1) for the purposes of the Levy, which include provisions:
    1. about reliefs or exemptions from the Levy,
    2. that disapply any provisions of NICs legislation that would otherwise be applied for the Levy by Section 3(1),
    3. that modify the application of any legislation applied by Section 3(1) in relation to the Levy,
    4. that apply (including with modification) provisions of the Tax Acts (i.e. legislation concerned with Income Tax or Corporation Tax) in relation to the Levy (so far as they would not already be applied by Section 3(1)).
  3. Section 4(3) allows regulations under Section 4(1) to make:
    1. different provision for different purposes,
    2. supplementary, incidental and consequential provisions, or
    3. transitional or transitory provisions and savings.
  4. Section 4(4) to (6) specifies the Parliamentary procedure for regulations made under Section 4(1). Regulations that have the effect of limiting the application of (or reducing or removing) any existing relief or exemption are subject to the affirmative procedure in the House of Commons only (subsections (4) and (5)). Under Section 4(6), all other regulations will be subject to the negative procedure in the House of Commons only.

Section 5: Transitional provision: temporary increase in rates of NICs payable to NHS

  1. Section 5 sets out the transitional arrangements for this measure. Section 5(1) specifies that these arrangements will only apply for the 2022-2023 tax year.
  2. Section 5(2) modifies the percentage rates of National Insurance contributions for the 2022-23 tax year set out in Part 1 of the SSCBA 1992 so that, for the 2022-23 tax year:
    1. the main rate of Primary Class 1 will be 13.25% (increased from 12% in 2021-22),
    2. the additional rate of Primary Class 1 will be 3.25% (increased from 2% in 2021-22),
    3. Secondary Class 1 will be 15.05% (increased from 13.8% in 2021-22),
    4. the main rate of Class 4 will be 10.25% (increased from 9% in 2021-22),
    5. the additional rate of Class 4 will be 3.25% (increased from 2% in 2021-22).
  3. Section 5(3) secures that NICs rates cannot subsequently be raised in tax year 2023-24 by reference to the higher temporary rates in 2022-23.
  4. Section 5(4) replicates the modifications made by Section 5(2) in Part 1 of SSCB(NI)A 1992, so that the temporary rate modifications also apply to Northern Ireland.
  5. Section 5(5) modifies section 162(5) of SSAA 1992. It stipulates that, for the 2022-23 tax year, the amount of contributions that are allocated to the NHS are increased as set out below. This ensures that all of the proceeds raised from the temporary rate increase set out at Section 5(2) and (4) are directed to the NHS.
    1. 69.23% increased from 50% of the proceeds from the additional rate of Class 1 and 4 will be allocated to the NHS
    2. 3.30% increased from 2.05% of earnings in respect of the main rate of Primary Class 1 NICs will be allocated to the NHS
    3. 3.15% increased from 1.9% of earnings in respect of Secondary Class 1 NICs will be allocated to the NHS
    4. 3.15% increased from 1.9% of earnings (and other forms of income) in respect of the Class 1A NICs will be allocated to the NHS
    5. 3.15% increased from 1.9% of earnings (and other forms of income) in respect of the Class 1B NICs will be allocated to the NHS
    6. 3.4% increased from 2.15% of profits in respective of Class 4 NICs will be allocated to the NHS.
  6. Section 5(6) replicates the provisions of Section 5(5) in respect of section 142(5) of SSA(NI)A 1992, so that the further allocation of contributions to the NHS also applies in Northern Ireland.

Section 6: Interpretation

  1. This Section defines various terms used in the Act.

Section 7: Short title and Crown application

  1. Section 7 gives the short title of the Act as the Health and Social Care Levy Act 2021 and provides for the Act to apply to the Crown.

Back to top