Changes to National Insurance and Dividend Tax from 2022

by Gavin Hooker

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On 7 September, the government announced an increase in National insurance contributions and dividend tax rates from April 2022.

These rates will increase by 1.25% across the UK, with the projected £12bn annual income to be allocated to pay for health and social care.

Changes to National Insurance rates

From 1 April 2022, there will be a temporary 1.25% increase in class 1 (employee and employer’s) and class 4 (self-employed) national insurance contributions. The 1.25% increase will also apply to class 1A and class 1B NIC paid by employers.

From April 2023, the increases will be legislated separately as a “health and social care levy” and the national insurance rates will return to the 2021/22 levels.

 

Employee Class 1 (main rate /higher rate)

Employer Class 1

Self-employed Class 4 (main rate/higher rate)

 2021/22 NIC rates

12% / 2%

13.8%

 9% / 2%

 2022/23 NIC rates

13.25% / 3.25%

 15.05%

10.25% / 3.25%

 2023/24 NIC rates

12% / 2%

 13.8%

 9% / 2%

 2023/24 Health and Social Care Levy

 1.25%

1.25%

1.25%

Changes to Dividend Tax rates

As well as levy, the government has announced a 1.25% increase in dividend tax rates from 1 April 2022. The £2,000 dividend allowance will remain.

 

Basic rate taxpayers

Higher rate taxpayers

Additional rate taxpayers

 2021/22 Dividend Tax rates

7.5%

32.5%

38.1%

 2022/23 Dividend Tax rates

8.75%

33.75%

39.35%

Remuneration and tax planning is key to understand how the increases will affect you. If you have any concerns about the increases and what they may mean for you and your business, please get in touch.

The content in this blog is correct as at 8 September 2021.