National Insurance Increase

In the Autumn of 2021 the Government announced a planned increase in the rates of National Insurance contributions (NICs) for April 2022.

An increase of 1.25% is due to be introduced next month from 6 April for the 2022/23 tax year, in April 2023 NICs will return to current rates however the additional 1.25% tax will be then be collected as a new Health and Social Care Levy.

The 1.25% increase will affect employees, employers and self employed tax payers earning over the primary threshold or lower profits limit.

The table below shows the increase

NIC 2022/23 NIC threshold 2021/22 NIC rates 2022/23 NIC rates
Employees (Class 1) £9,880 12%/2% 13.25%/3.25%
Employers (Class 1) £9,880 13.8% 15.05%
Self-employed (Class 4) £9,880 9%/2% 10.25%/3.25%

As the table shows, employees earning between £9,880 and the higher rate threshold of £50,270 will be charged a rate of 13.25% rather than the current rate of 12% with any earnings over the higher rate also be charged at 3.25% rather than 2%.

Self employed taxpayers from April will be paying 10.25% on profits between £9,880 and £50,270 and 3.25% on profits over £50,271, rather than the current 9% and 2%.

Employers will also see an increase in their NICs, with Employers NIC’s increasing to 15.05%.

 

Dividends

The changes announced will also impact dividend income above the £2,000 dividend allowance as the tax rate of dividends has also been increased by 1.25%, as shown in the table below:

Dividends 2021/22 Tax 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%

 

If you have any questions regarding the increase in NICs please contact us on 01480 596636.

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