Despite the manifesto promise the government has broken its pledge on no tax increases. The government’s announcement of increases to National Insurance and Dividend Tax has not been without controversy.
Given that these increases will have an impact on you and your business we thought it appropriate to discuss the changes with you.
The government recently sent a request to payroll agents to add the message to payslips that the increase is “For the NHS”, so watch out for this on your payslips in April!
When do the Increases to National Insurance take effect?
National Insurance & Dividend tax rates will increase by 1.25% from 6th April 2022. This has been introduced by the government in order to fund the NHS and Health & Social Care sectors.
What is the National Insurance increase for?
The NIC increase which is being introduced from 6th April 2022 will be replaced from 6 April 2023 by a new Health and Social Care Levy.
The purpose of levy is for it to be solely used for the NHS & Health and Social Care sectors. The government has guaranteed that this money will not be spent on anything else. People who don’t currently pay NIC and are working above the state pension age will also be required to pay the levy.
From the tax year 2022/23 NIC rates will revert back to the same levels as 2021/22 and will be replaced by the Health and Social Care Levy.
The increase will be applicable as follows:
Employers and Employees NIC (Class 1 Primary and Secondary Contributions)
Benefits in kind (Class 1A NIC)
PAYE settlement agreements (Class 1B NIC)
Self-Employed operating as a sole trader or partnership (Class 4 NIC which is based on profits)
The increase will not apply if you are over the State Pension age.
Classes 2 and 3 NIC which are payable at a fixed weekly rate will not be affected by this proposed increase.
Now is a good time to check over your National insurance record