While the pandemic-induced recession is greater than we thought it would be, precautions and safety precautions must also be taken. The COVID-19 pandemic has impacted the UK economy in many ways. From lockdown restrictions, and most of it is the declaration of bankruptcy of many businesses as they officially close down their operations because they could not sustain the necessary costs, especially those small businesses.
Yet even under worse conditions, the UK economy was able to adapt to lockdowns despite the decline in economic activity and the recovery measures that kept operations afloat. Despite differences of opinion regarding the pandemic’s impact, one thing is certain: it will have an effect on both micro and macroeconomic levels.
Taxes have an immense impact on the economy. There is a simple reason for this: it directly affects the amount of money in people’s hands.
BBC Source – https://www.bbc.com/news/uk-politics-58476632
What is the New Health and Social Care Tax for UK?
Regarding this, last Tuesday, September 7th, Prime Minister Boris Johnson made an announcement regarding a new health and social care tax to be implemented across the UK in order to pay for care sector reforms and an increase in NSH funding in England.
According to Minister Johnson, an estimated £12bn a year would be required to address the financial backlog caused by the Coronavirus pandemic and scale up social care for the UK. He even quoted that “those who earn more will pay more”. With that in mind, leaders in social care had some concern regarding money that it was like “nowhere near enough” and it wouldn’t even address the current problems.
It is said that the tax plan will begin with a 1.25 percentage point rise in National Insurance starting April 2022.
Both employer and workers will pay this, and eventually will become a separate tax on earned income starting from the year 2023 which is calculated in the same way as National Insurance and reflecting on an employee’s payslip.
These are paid by the following:
- All Working Adults
- Older Workers (State pensioners who are still working)
Paying 1.25% more in Pounds for National Insurance (NI).
-Breaking it down as a payment
- Employees pay NI on their wages
- Employers also pay extra NI contributions for staff
- The self-employed pay NI on their profits
How much tax changes cost me as an employee?
An example would be:
- If an employee has around £20,000 a year, pay extra will be £130
- If it is an income of £50,000, will pay £505 more
Who are exempted from this tax change?
That would be those people earning under only £9,564 a year, or £797 a month, don’t have to pay National Insurance.
What is the health and social care tax increase for?
Over the next three years, a portion will be moved into the social care system. Most of the people who use this are the elderly and/or have high care needs, such as those who have trouble washing, dressing, eating, and taking medication.
From October 2023, the aim will be to make sure that no one in England pays more than £86,000 in care costs (excluding accommodation and food).
A summary and a glance at the recent update from UK Prime Minister are already listed above for health and social care tax changes. Saying aside, one way to manage your finances is through the professional services of an accounting firm. Annette Ferguson – Chartered Accountant and Certified Profit First Professional – can help you unlock financial strategies to improve the profitability of your business amidst an economic crisis. Book a call with us. You can also follow us on any of our social media channels and subscribe to our YouTube channel.