As part of the introduction of the Health & Social Care Levy, a 1.25% increase to National Insurance Contributions (NIC) will be introduced for employees and employers from 6 April 2022. There will also be a 1.25% rate increase applied to dividend income from the same date.
The plans were initially outlined in September 2021 and despite recent calls for the Levy to be postponed, the Government have confirmed their intention to go ahead with the increase.
The impact for employers is that NIC will increase from 13.8% to 15.05% on the following:
The impact for employees is that NIC will increase from 12% to 13.25% on earnings between £9,880 per year (£823 per month) and £50,270 per year (£4,189 per month). For someone earning £50,270 this represents an increased NIC liability of £504 per year (£42 per month); or for someone earning £30,000 the NIC increase will be £251 per year (21 per month).
For those earning in excess of £50,270 the NIC rate of the excess will increase from 2% to 3.25%.
For the self-employed the class 4 NIC rate will increase from 9% to 10.25% on profits between £9,880 and £50,270 and from 2% to 3.25% of profits in excess of £50,270. For someone with profits of £50,270 this represents an increase of £ 504; or for someone with £30,000 of profits the NIC will increase will £251.
For individuals receiving dividends the rates will increase from 7.5% to 8.75% for dividends within the basic rate of tax, 32.5% to 33.75% on dividends at higher rates and 38.1% to 39.35% in the additional rates of tax.
Everyone should now consider the opportunities available to minimise the effect of the increases:
We are here to help so contact us if you want to discuss any of the planning opportunities.