Tax & national insurance increases explained
This affects everyone earning a salary or receiving dividends and everyone who is self-employed, including partners in partnerships.
From April 2022, national insurance rates will increase by 1.25 per cent.
This applies to both Class 1 and Class 4 NIC, but, it seems, not to Class 3 or Class 2 NIC.
Therefore, instead of paying employees’ NIC at 12 or 2 per cent on your salary, depending on your level of income, you will pay either 13.25 per cent or 3.25 per cent. Employers will also have to pay 1.25 per cent more employer’s NIC, and Class 1A NIC, than they do already, i.e. 15.05 per cent, instead of 13.8 per cent.
If you are self-employed and pay Class 4 NIC, this will be charged at 10.25 per cent or 3.25 per cent depending on your level of income, instead of at 9 or 2 per cent as it is at the moment.
After April 2023, this extra 1.25 per cent will be charged separately for social care. NI Contributions should then revert to their current levels.
All workers from April 2023 will have to pay this social care levy, including those over statutory retirement age.
In addition, dividends will be taxed at 1.25 per cent more from April 2022. This means that you will pay income tax on your dividends at 8.75 per cent, 33.75 per cent, or 39.35 per cent, dependent on your level of income. This note is for general guidance only. No responsibility is accepted for the consequences of any action you may take on reading it.
If you have any specific questions please contact us for advice