National Insurance and dividend tax to go up 1.25% from April 2022

September 8th, 2021

From April 2022, both national insurance and dividend tax are set to rise by 1.25%.

The government has announced tax changes to fund £12 billion a year to be spent on the NHS and social care across the UK.

National Insurance contributions (NICs) will increase by 1.25% for one year only for employees, employers and the self-employed from‌‌ ‌April‌‌ ‌2022. This will cover both Class 1 (employee and employer), Class 1A and 1B and Class 4 (self-employed) NICs. Those above State Pension Age are not impacted by the April 2022 changes.

From April 2023, a new ringfenced Health and Social Care Levy of 1.25% will be introduced which will apply to those who pay Class 1 (employee and employer), Class 1A and 1B and Class 4 (self-employed) NICs and will also be extended to those over State Pension age who are in work. When the new levy comes into effect, National Insurance rates will revert back to current levels.

The levy will also apply to individuals above State Pension age with employment income or profits from self-employment above £9,568.

The levy will be administered by HMRC and collected through the current reporting and collection procedures for NICs – Pay As You Earn and Income Tax Self Assessment.

Like National Insurance, levy contributions will apply UK-wide, people will pay the same in England, Scotland, Wales and Northern Ireland.

From 2023-24, levy contributions will need to appear as a separate item on payslips. Where possible a generic message should be included payslips for the next tax year (2022-23). More information on payslip requirements will be available in due course.

The government will also increase by 1.25% from April 2022 the rate of income tax which is paid by people who receive dividend income from shares.

Health and Social Care Levy / National Insurance

 

 

Self-employed Main / higher rate
Current NICs rates (2021-22) 9% / 2%
2022-23 NICs rates 10.25% / 3.25%

2023-24 NICs rates

Levy

9% / 2%

1.25%

Charged on all earnings/profits above: (2-21-22 thresholds) £9,568

 

  Employee Main / higher rate
Current NICs rates (2021-22) 12% / 2%
2022-23 NICs rates 13.25% / 3.25% 

2023-24 NICs rates

Levy

12% / 2%

1.25%

Charged on all earnings/profits above: (2-21-22 thresholds) £9,568

 

  Employer
Current NICs rates (2021-22) 13.8%
2022-23 NICs rates 15.05%

2023-24 NICs rates

Levy

13.8%

1.25%

Charged on all earnings/profits above: (2-21-22 thresholds) £8,840

Dividend tax increase

From April 2022, all rates of dividend tax will increase by 1.25 per cent. This change will apply UK-wide. It will be scored at the Budget and legislated for in the next Finance Bill.

  Basic Rate Higher Rate Additional Rate
Current dividend tax rates (2021-22) 7.5% 32.5% 38.1%
2022-23 dividend tax rates 8.75% 33.75% 39.35%

Read more here