Analysis

Britain’s Tax Burden Jumps To Its Highest Level Since 1950 As Conservative Govt Unveils New 1.25% Levy To Fund Health And Social Care

  • British PM Boris Johnson announced a new health and social-care levy of 1.25% on compulsory National Insurance(NI) to fund country's mounting health and social care costs in the wake of the COVID-19 pandemic. Income from share dividends - earned by those who own shares in companies - will also see a 1.25% tax rate increase.
  • The new tax proposal is expected to garner £12bn ($17bn, or about 0.5% of GDP) a year for the exchequer. This is in addition to a net tax increase of £25bn unveiled as part of budget presented in March by Chancellor Rishi Sunak, mostly mobilised via higher corporate tax (corporate tax goes up from 19% to 25% beginning 2023).
  • The new £12bn levy on top of the £25bn taxes unveiled as part of budget earlier this year will push Britain’s tax burden to the highest level since 1950.

Swarajya StaffSep 08, 2021, 12:03 PM | Updated 12:03 PM IST
10 Downing Street

10 Downing Street


British Prime Minister Boris Johnson on Tuesday (Sep 7) announced a new set of tax levies claiming that it is required to fund country's mounting health and social care costs in the wake of the COVID-19 pandemic.

The new tax proposal is expected to garner £12bn ($17bn, or about 0.5% of GDP) a year for the exchequer. This is in addition to a net tax increase of £25bn unveiled as part of budget presented in March by Chancellor Rishi Sunak, mostly mobilised via higher corporate tax (corporate tax in U.K goes up from 19% to 25% beginning 2023).

The new health and social-care levy of 1.25% on compulsory National Insurance(NI) will apply to both employees’ earnings and employers’ payrolls. It comes in to effect from April 2022. From 2023, it will be treated as a separate tax on earned income from 2023.

Income from share dividends - earned by those who own shares in companies - will also see a 1.25% tax rate increase.

The proposed hike in the NI contributions by taxpayers breaks Johnson's election manifesto pledge not to levy any such taxes when elected in 2019.

The new £12bn levy on top of the £25bn taxes unveiled as part of budget earlier this year will push Britain’s tax burden to the highest level since 1950.


Johnson said no Conservative government wanted to raise taxes - but he defended the move as "the right, reasonable and fair approach" in light of the pandemic, which saw the government spend upwards of £407bn on support.

Johnson said that the new taxes will help clear the backlog in the NHS created by Covid-19 as it used to fund capacity augmentation in hospitals and creating space for nine million more appointments, scans and operations.

“I’ll be absolutely frank with you – this levy will break our manifesto commitment. But a global pandemic wasn’t in our manifesto either,” Johnson said.

A portion of the money - £5.4bn over the next three years - will also go towards changes to the social care system, with more promised after that. A cap will be introduced on care costs in England from October 2023 of £86,000 over a person's lifetime.

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