On 7 September, Boris Johnson announced that NI and dividend tax rates will be hiked to help fund social care, pay for coronavirus support measures and clear the NHS backlog. Who will be affected and by how much?
Firstly, NI rates will increase by 1.25% from April 2022. This will apply to both primary and secondary Class 1 contributions, which will increase to 13.25% and 3.25% for earnings up to, and above, the upper earnings limit respectively. Class 4 rates will also increase to 10.25% and 3.25%. The additional 1.25% will be carved out as a separate levy from April 2023 – essentially it will be a new tax.
To illustrate what this will mean for employees, the following table is a useful reference, assuming the current NI thresholds apply:
Salary Current NI bill Expected increased NI bill Change £15,000.00 £651.84 £719.74 £67.90 £25,000.00 £1,851.84 £2,044.74 £192.90 £35,000.00 £3,051.84 £3,369.74 £317.90 £45,000.00 £4,251.84 £4,694.74 £442.90 £55,000.00 £4,951.84 £5,519.74 £567.90
Secondly, the dividend tax rates will also increase by 1.25%, i.e. to 8.75%, 33.75% and 39.35% for basic, higher and additional rate taxpayers respectively.
About Oscar Fairchild: Oscar Fairchild (incorporating Redwood Clarke since 01.09.18) is an ACCA chartered and certified and AAT qualified accountancy, financial consultancy & bookkeeping practice with offices in The City of London, and Billericay, Essex. Offering a wide range of services including Self-Assessment Services, Annual Returns, VAT Returns, Credit Control, Payroll, Auto Enrolment Pension and Management Account services to high growth businesses and licensed London taxi drivers across London, Essex and Hertfordshire.