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Increases in National Insurance and Dividend Tax

Proposed increases in National Insurance and Dividend Tax

Yesterday (7/9/21) the UK Government announced its plans for a 1.25 percentage point increase in National Insurance Contributions (normally considered as a tax to fund pensions) and Income tax on dividends. The aim of the increases are to raise about £36 billion over three years, which is intended to be used to fund the NHS and Social Care. The planned increases will take effect from April 2022. Then, from April 2023, once HMRC’s computer systems have been updated, the National Insurance increase will be shown as the ‘Health and Social Care Levy’ which will appear as a separate line on employees’ payslips. The proposed increases are expected to be voted on by parliament and passed today.

National Insurance increase from April 2022

From April 2022 National Insurance contributions will increase by 1.25% for both employees and employers (ie 2.5% in total). The increase will apply to:

  • Primary Class 1 National Insurance: paid by employees
  • Secondary Class 1 National Insurance: paid by employers
  • Class 4 National Insurance: paid by self-employed

You can read about the increases here.

The current National Insurance rates depend on the situation, but in general terms for the year 2021/22:

  • employees pay National Insurance of 12% on earnings between £184 to £967/week (£797 to £4,189/month) and 2% on earnings over £967/week (£4,189/month)
  • employers pay National Insurance of 13.8% on earnings above £170/week (£737/month)
  • self employed pay, depending on the situation, Class 4 National Insurance of 9% on earnings between £9,568 and £50,270/year and an additional 2% on earnings above £50,270/year and an additional £3.05/week Class 2 National Insurance if you earn more than £6,515

Dividend increase from April 2022

From April 2022 tax on dividend income will increase by 1.25%. You can read about the increase here.

The current rates are as follows:

  • First £2,000: tax free
  • Basic rate tax payers: 7.5%
  • Higher rate tax payers: 32.5%
  • Additional rate tax payers: 38.1%

Questions and assistance

Should you have any questions on how these changes might impact you and your business please feel free to call a member of our team today.

Proposed increases in National Insurance and Dividend Tax Yesterday (7/9/21) the UK Government announced its plans for a 1.25 percentage point increase in National Insurance Contributions (normally considered as a tax to fund pensions) and Income tax on dividends. The aim of the increases are to raise about £36 billion over three years, which is […]

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