National Insurance hike to pay for social care in England
Boris Johnson announced on Monday that certain National Insurance contributions (NICs) paid by both employed and self-employed workers will rise by 1.25 percentage points from April 2022.
Dividend tax rates will also rise by the same amount from the next tax year. The move is in a bid to help fund health and social care costs.
Here's what's changing:
Certain NIC rates will increase by 1.25 percentage points from April 2022. From 2023, the health and social care levy element will then be separated out and the exact amount employees pay will be visible on their pay slips. It will be paid by all working adults, including workers over the state pension age – unlike other NICs.
This increase will apply to Class 1 NICs paid by employees and Class 4 NICs paid by self-employed workers. It will be administered by HMRC and collected via the current channels for NICs; Pay As You Earn and income tax self-assessment.
What does that mean?
An employed basic rate taxpayer earning the median basic rate taxpayer’s income of £24,100/yr in 2022/23 would contribute £180/yr, while a higher rate taxpayer earning the median higher rate taxpayer’s income of £67,100/yr in 2022/23 would pay £715/yr.
Class 2 self-employed NICs and Class 3 NICs, which are voluntary payments made to top-up state pension gaps, are not impacted by the levy. The levy will also not be taken from pension income.
Dividend tax rates will rise by 1.25 percentage points from April 2022. This is a tax on money given to you by a company you hold shares in, usually when it's made a profit.
Money Saving Expert have a useful Tax Rates 2021/22 guide on current NICs and dividend tax rates. https://www.moneysavingexpert.com/banking/tax-rates/
You can also use their Income Tax Calculator to work out your current take home pay. https://www.moneysavingexpert.com/tax-calculator/
If your need more information on how the NI increase may affect you or your business, get in touch. Call us on 01772 925 230.
Alternatively, fill in the form on our Contact Us page, and we’ll get back to you.
