National Insurance (NIC) rates:
National Insurance is a very important money-raising tool for the UK treasury, which brings in around 23% of total Government revenue. Last week on 7 September, the UK prime minister announced a 1.25% rise in National Insurance Contributions (NICs) and dividend tax from 6 April 2022, aim to raise £36bn in the next three years.
The 1.25% NIC rise in Class 1 primary and secondary, Class 1A, 1B, and Class 4 NICs from 6 April 2022. But Class 2 and 3 NIC will not be affected in this announcement.
The rates of NICs will return to their lower rates on 6 April 2023, when a formal contribution to the health and social care levy of 1.25% commences. The levy will be a new tax and separate from NIC. This will also be paid by individuals who are working above the State Pension age (pensioners currently do not pay NIC). This new health and social care levy, expected to raise £12bn additional funds to support Social Care and the NHS.
NICs current rates and proposed changes
|
Band |
Current rate for Class 1-primary (employee) 2021-22 |
Proposed rate for Class 1-primary (employee) 2022-23 |
Current rate for Class 1-Secondary (employer) 2021-22 |
Proposed rate for Class 1-Secondary (employer) 2022-23 |
|
Up to PT/ST |
0% |
0% |
0% |
0% |
|
PT/ST-UEL |
12% |
13.25% |
13.80% |
15.05% |
|
UEL |
2% |
3.25% |
13.80% |
15.05% |
Class 4 NIC current rate is 9% and above UEL 2%. Propose rate will be 10.25% and above UEL 3.25%.
Dividend rates:
Dividend tax rate will increase by 1.25% from April 2022. This change will affect directors and shareholders. This will also apply for S.455 tax where directors accounts are overdrawn.
Dividend current rates and proposed changes
|
Tax band |
Current rates 2021-22 |
Proposed rates from 2022-23 |
|
Basic rate (BR) |
7.5% |
8.75% |
|
Higher rate (HR) and S.455 tax |
32.5% |
33.75% |
|
Additional rate (AR) |
38.1% |
39.35% |
This 1.25% tax rise will affect all the taxpayers from 2022-23. From 2023-24 how much effect it will have on taxpayers, depends on available allowance and the tax bands/TH in the future years, details are not available now. This also expected to have some changes in the future finance bills.
NAZALI TAX & LEGAL