Health and Social Care Levy (Repeal) Bill 2022-23

The purpose of the Health and Social Care Levy (Repeal) Bill 2022-23 is to repeal the Health and Social Care Levy Act 2021.

The Act established the Health and Social Care Levy, which was first announced by then Prime Minister Boris Johnson in September 2021.

The Levy was introduced to raise funds for health and social care for a three-year period from 2022/23 to 2024/25/. These funds started being raised through an increase in the rates of National Insurance contributions from 6 April 2022 of 1.25 percentage points.

Alongside the proposal to repeal the Levy, the Treasury has stated in a factsheet on the Bill that “funding for health and social services will be maintained at the same level as if the Levy was in place.”

The Health and Social Care Levy (Repeal) Bill went through all stages in the House of Commons on 11 October, and received Royal Assent on 25 October.

What is the Health and Social Care Levy?

In a statement to the House on 7 September 2021, the then Prime Minister Boris Johnson announced plans to substantially increase funding for health and social care over the next three years. This would  be funded by a new tax: the Health and Social Care Levy. The Levy would be based on National Insurance contributions (NICs).

From 2023, the Levy would be legislatively separate from NICs and would also apply to individuals working above State Pension age, who are not currently liable to pay NICs on their earnings. The rates of income tax that apply to income from dividends would also be increased, to help to fund these plans.

The Government proposed the Levy would apply to employees and employers liable for Class 1 NICs, and to self-employed people liable for Class 4 NICs.

• In 2022/23 the Levy would be collected by increasing the current rates of NICs by 1.25 percentage points.
• In 2023/24 a formal legal surcharge of 1.25 per cent would replace the increase in NICs rates and apply to those working above State Pension age. The rates of NICs would return to their previous level.

Full details were set out in the Government’s, Build Back Better: Our Plan for Health and Social Care, published on 7 September 2021.

In its Economic and Fiscal Outlook published alongside the Autumn 2021 Budget, the Office for Budget Responsibility (OBR) estimated the Levy would raise around £12.4 billion a year for health and social care over the three years 2022/23 to 2024/25.

How was the Levy introduced?

Following Mr Johnson’s statement, the Government introduced the Health and Social Care Levy Bill 2021-22 to make provision for these tax measures. The Bill was ‘fast tracked’ so that all of its stages were taken in the House of Commons on 14 September 2021. The Health and Social Care Levy Act 2021 received Royal Assent on 20 October 2021. Further details are provided in the Commons Library briefing on the Health and Social Care Levy Act 2021.

Provision to increase the rates of tax on dividend income was made by section 4 of the Finance Act 2022.

This was introduced through the National Insurance Contributions (Increase of Thresholds) Act 2022.

Subsequently the first stage of introducing the Levy took place on 6 April 2022, when the rates of NICs for employees, employers and the self-employed were increased by 1.25 percentage points.

The Government’s proposal to cancel the Levy

At Prime Minister’s Questions on 7 September 2022, the then Prime Minister Liz Truss announced the Government would “reverse the national insurance increase” (which was introduced by the Health and Social Care Levy Act 2021). On 22 September 2022, the then Chancellor Kwasi Kwarteng announced the 1.25 percentage point rise in NICs rates for employees, employers and the self-employed would be reversed from 6 November 2022, and that the Health and Social Care Levy Act 2021 would be repealed.

To give effect to these changes, the Health and Social Care Levy (Repeal) Bill 2022-23 was introduced the same day. The Bill, with its explanatory notes, is published on the Bill’s page on Parliament.uk, which also gives details of its parliamentary progress to date. HM Revenue & Customs (HMRC) has published an impact assessment of the Bill.

Following the Chancellor’s announcement, in her business statement later the same day the Leader of the House Penny Mordaunt announced that all stages of the Bill in the House of Commons would take place on 11 October.

Subsequently on 11 October the House approved a motion for all of the Bill’s stages in the Commons to be taken that day, and the Bill was agreed, unamended (Votes and Proceedings No.50 (PDF), 11 October 2022; HC Deb 11 October 2022 cc56-100). Following its consideration by the House of Lords the Bill received Royal Assent on 25 October (Votes and Proceedings No.59 (PDF), 25 October 2022).

The Treasury factsheet on the Bill notes the increase in tax rates on dividend income, which were announced along with the Levy and took effect from April 2022, will be reversed from April 2023.

Further information

Commons Library briefing Health and Social Care Levy Act 2021, 6 October 2022, discusses the background to the Government’s decision to introduce the Ley and examines the legislation to implement it.

Commons Library briefing National Insurance contributions: an introduction, 16 December 2019, gives an overview of the National Insurance system, and the reforms that have been made to it in recent years.

Commons Library briefing Proposed reforms to adult social care (including cap on care costs), 3 October 2022, examines the proposed changes to how people pay for social care, and the Government’s plans for wider reform.