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The NHS is Tax-Funded, but not Tax-Free

Author: Henry Ejdelbaum

Tags: Funding, Government, NHS, Taxes

The NHS is the 5th-largest employer in the world. With 1.5 million employees as of 2017, it’s a juggernaut of an organisation. It’s also one that gets a huge amount of funding from the Government – last year an extra £20.5bn per year of funding was announced. A significant amount of that will be going into growing the workforce.

However, whilst the figure looks large on paper, how much will actually go to the NHS? There is a rarely-mentioned tax consideration that knocks a substantial amount off this funding. Whilst the NHS is a government-funded organisation, supported by UK taxes, there is no agreement about how NHS employees are treated for tax purposes. This means that the NHS contributes 13.8% of salaries to National Insurance. So, when funding is announced for the NHS workforce, part of the money goes straight back into National Insurance! That’s £1-2bn of funding immediately going back – a lot of money no matter how you look at it.

We’re not suggesting that this is deliberate obfuscation, but it’s an important reminder that you can’t believe everything you read in the papers. Taxes apply everywhere, even when you think they might not!