Early in September, the Government announced National Insurance Contributions (NIC) and dividend tax increases. These increases are a means to try to recoup some of the costs which the coronavirus has had on the NHS, but also to boost funding for future health and social care across the UK.
From April 2022 there will be a 1.25% NIC increase across the following taxable classes:
- Class 1 employee
- Class 4 self employed
- Employers Class 1, Class 1A and 1B
Also from April 2022, there will be a 1.25% increase across all dividend tax bands, meaning that from next April the following dividend tax rates will apply:
- Basic taxpayers – 8.75%
- Higher taxpayers – 33.75%
- Additional taxpayers – 39.35%
The current £2,000 annual dividend allowance will not be changed.
However, from April 2023 the NIC rates will return to their current 2021/22 levels, but the Government will bring in legislation to create a health and social care levy. This will allow these tax revenues to be ringfenced for health and social care purposes only.
Furthermore, also from April 2023, retired individuals over the state pension age who are employed or self-employed will have to start paying 1.25% NIC, even though they are currently exempt from doing so.
In making these tax increases the Government is hoping to raise £12bn in annual revenue which can be used solely for health and social care.
Personal care costs capped
The Government also stated that from October 2023, the maximum an individual will be expected to pay for their care costs will be capped at £86,000 across their lifetime. And people who have less than £20,000 in savings or assets will not have to make any contributions towards their care costs, this limit is being raised from the current £14,000 threshold.
Further details about the Government’s plan for health and social care can be found here.
How can we help?
If you have concerns about the NIC and dividend tax increases and how they could affect you personally or your business, do get in touch. We would be happy to explain the changes in further detail. You can contact us here.