AAT responds to proposed Health and Social Care Levy

The government has today announced plans to introduce a new Health and Social Care Levy of 1.25% on earned income and an equivalent 1.25% increase in dividend tax to help fund the NHS and social care.

Responding to the announcement, Phil Hall, AAT's Head of Public Affairs and Public Policy, said: "AAT agrees that the NHS and social care require increased funding, and that such increases should not be funded by more borrowing and debt, but introducing a new 1.25% levy based on National Insurance Contributions (NICs) is probably not the best way to raise these funds."

AAT contends that there are various problems with the government’s proposals.

Hall explained: "As NICs start at a lower level than Income Tax, this will compound the effect on low earners whilst those receiving their income in other forms, for example income from property, will make no contribution.

"The levy will also apply to individuals working above state pension age, but rather than ending NIC exemptions for working pensioners (as AAT has repeatedly recommended) they will only pay 1.25% and continue to enjoy an NICs exemption, which is largely unjustifiable.

"It’s also worth highlighting that an NICs rise for employers at a time when many are still facing staff and material shortages, and associated cost increases, is likely to slow the UK’s economic recovery."

AAT responded to the Office of Tax Simplification Capital Gains Tax review call for evidence in September 2020, highlighting some of the above.

AAT also responded to the Treasury Select Committee inquiry into Tax after Coronavirus, which also highlighted some of the above.