Boris Johnson announced yesterday 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.
| Salary | Current NI bill | Expected increased NI bill | Change |
|---|---|---|---|
| £15,000.00 | £651.84 | £719.74 | £67.90 |
| £25,000.00 | £1851.84 | £2044.74 | £192.90 |
| £35,000.00 | £3051.84 | £3369.74 | £317.90 |
| £45,000.00 | £4251.84 | £4694.74 | £442.90 |
| £55,000.00 | £4951.84 | £5519.74 | £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.
This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.