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National Insurance and Dividend Tax Increases in 2022

From April 2022, there will be increases to national insurance contributions and dividend tax rates. This is projected to bring in £12 billion income that will be used to pay for health and social care.


Read on for details of the changes.

The Prime Minister, Boris Johnson, has confirmed that rates of national insurance are to be increased in order to cover the costs of the coronavirus pandemic on the NHS.


1 April 2022 there will be a temporary 1.25% increase in class 1 (employee) and class 4 (self employed) national insurance contributions paid by workers. This will run alongside an increase of 1.25% in class 1 secondary national insurance contributions paid by employers.


This applies to employees, self employed individuals and partners earning above the class 1 primary threshold/class 4 lower profit limit. Employers will pay the increase for employees earning above the class 1 secondary threshold.


Various reliefs and allowances from employer's secondary class 1 national insurance contributions will apply to the increase.


Then from April 2023, the increases will move to be legislated as a separate 'health and social care levy' and the national insurance contributions will again return to their 2021/22 levels. At this time the levy will extend to include individuals in employment who are over the state pension age in employment.


Alongside this, the government plan to increase dividend tax rates by 1.25% from 1 April 2022. This means rates will be:

  • 8.25% for basic rate taxpayers

  • 33.75% for higher rate taxpayers

  • 39.35% for additional rate taxpayers

The £2,000 dividend allowance will remain.


The financing of social care in the UK will be changing in October 2023 and the money raised from these measures will contribute to this funding.

 

Contact us if you would like to discuss preparations for the changes in more detail. Give us a call on 01423 431889 or email catherine@bctaccountants.co.uk.


Please note: all stats are accurate for the 2021/22 tax year.

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