Boris Johnson has announced a new 1.25% health and social care levy on earned income, with dividend rates increasing by the same amount. He\u00a0said the levy would fix the long term problems of health and social care that have been \u201ccruelly exposed by Covid\u201d. The increase in national insurance comes into effect in April 2022 and is expected to raise almost \u00a336 billion for health and social care over the next three years. The 1.25% health and social care levy will be a separate tax to income tax and national insurance. The key features are: \tPeople starting care from October 2023 will not pay more than \u00a386,000 over their lifetime (not including accommodation) \tAnyone with assets of less than \u00a320,000 will not make any contribution. \tThe amount of help given to anyone with assets between \u00a320,000 and \u00a3100,000 will be means tested. Funding the Health and Social Care Levy This will be shared between individuals and businesses, but the Prime minister explained that \u201ceveryone will contribute according to their means, including those above state pension age\u201d. He added: \u201cThose who earn more, will pay more. Because we\u2019re increasing the dividends tax rate we will be asking better off business owners and investors to make a fair contribution too.\u201d The PM confirmed that the highest earning 14% will pay around half the revenues and no one earning less than \u00a39,568 will pay. He claimed that 40% of all businesses will pay nothing at all. The NIC increase is on both employers and employees, with the total increase being 2.5%. Why Increase NICs not Income Tax? The prime minister defended opting for the national insurance option., saying \u201cIncome tax isn\u2019t paid by businesses so the whole burden would fall on individuals, roughly doubling the amount that the basic taxpayer could come to expect and the total revenue from CGT amounts to less than \u00a39bn this year.\u201d However, it will increase employment costs for businesses and there is concern that some employers will reduce pay rises to compensate for the NIC increase. The increase will also hit hard-pressed directors of small companies who have been largely unsupported during the pandemic.