National Insurance rises
Pending the introduction of the Health and Social Care Levy from 6 April 2023, Class 1 (employers and employees), Class 1A, Class 1B and Class 4 National Insurance contributions will all rise by 1.25% for 2022/23 only.
This means that if you are an employee, you will pay National Insurance at the rate of 13.25% on earnings between £190 and £967 per week and at the rate of 3.25% on earnings in excess of £967 per week. Employers will pay Class 1 contributions on earnings in excess of the relevant secondary threshold at the rate of 15.05%. The rate of Class 1A and Class 1B National Insurance contributions will also rise to 15.05%.
If you are self-employed, you will pay Class 4 National Insurance contributions at the rate of 10.25% on profits between £9,880 and £50,270 and at the rate of 3.25% on profits in excess of £50,270. Where possible, advancing work so that profits fall in 2021/22 rather than 2022/23 will save National Insurance contributions.
Talk to us about what the increase in National Insurance contributions means for you.
Dividend tax rate increased from April 2022
Alongside the increases in National Insurance contributions and the introduction of the Health and Social Care Levy, dividend tax rates are increased from 6 April 2022 by 1.25% to provide funding for health and adult social care.
For 2022/23, dividends are taxed at the rate of 8.75% to the extent that they fall within the basic rate band, at 33.75% to the extent that they fall within the higher rate band and at 39.35% to the extent that they fall within the additional rate band. The dividend allowance remains at £2,000.
It is advisable to review your dividend policy prior to 6 April 2022. If you have sufficient retained profits, it may be advisable to pay a dividend prior to 6 April 2022 where doing so will mean that it is taxed at a lower rate than if the dividend is paid on or after that date.