It was confirmed by Boris that the National Insurance (NIC) rates and dividend rates will be increased in April 2022. The plan is to use this to increase the funding for health and social care to pay for reforms to the care sector and NHS funding. So here is a detailed breakdown of what the changes are and how they affect you.
National Insurance
What is changing?
From April 2022 a 1.25% increase will be applied to Class 1 and Class 4 NIC rates. This change will then be reversed in April 2023 but replaced with a separate 1.25% Health and social care levy. This has been done in 2 stages in order to allow HMRC time to update it’s systems with the new levy.
The reversal of NIC increase and introduction of the levy in April 2023 will only affect the presentation of the deduction on your payslip or tax return for the majority. However, for individuals working above the state pension age this 1.25% levy will still apply even though they are currently exempt from NIC.
Who’s affected?
This change will affect all employees and self employed individuals over the primary threshold of £9,568.
How much will it cost?
To give you a rough idea, here are a range of gross salaries and the amount this change will affect the person receiving it:
| Annual Salary | Current NIC payable | NIC payable after April 2022 | Increase |
| 20,000 | £1,251 | £1,381 | £130 |
| 30,000 | £2,451 | £2,706 | £255 |
| 50,000 | £4,851 | £5,356 | £505 |
| 80,000 | £5,479 | £6,359 | £880 |
| 100,000 | £5,878 | £7,008 | £1,130 |
Dividends
What is changing?
From April 2022, the dividend rate is also going to increase by 1.25% and this will be applied across all tax bands. As it stands there has been no change to the dividend allowance so your first £2,000 dividend will remain tax free.
Who is affected?
This change will affect all taxpayers with total dividend income in excess of £2,000, the new rates from April 2022 are shown below:
| Threshold | Current rate | 2022/23 Tax rate |
| Basic rate taxpayer | 7.5% | 8.75% |
| Higher rate taxpayer | 32.5% | 33.75% |
| Additional rate taxpayer | 38.1% | 39.35% |
What to do about it?
With these up and coming changes it’s even more important to get on top of your tax planning to make the most of the lower rates before they change. If you are concerned by these increases or would just like to make the most of the lower rate get in touch and one of our expert advisors will be able to put a plan into motion that works for you.
