In September 2022, the Government set out a series of tax increases that will come into effect in April 2022. The increases are designed to provide additional ringfenced funding of some £12 billion to the NHS and local authorities to improve the UK’s health and social care systems. The changes affect not only National Insurance via the Health and Social Care Levy (Levy) but also the tax rates on dividend income.
The following tax changes will take effect throughout the UK from April 2022:-
- the tax on dividends increases by 1.25% (the £2,000 tax free allowance remains but the new bands will be 8.75%, 33.75% and 39.35%);
- National Insurance Contributions (NICs) increase by 1.25% for employees, employers and the self-employed so that:-
- the employee rates (Class 1) rise from 12% and 2% to 13.25% and 3.25%;
- employer rates (Class 1) will rise from 13.8% to 15.05%; and
- the self-employed rates (Class 4 but not Class 2 or Class 3) will rise from 9% and 2% to 10.25% and 3.25%.
For the first year (i.e. 2022/23) the Levy will be collected via the temporary increase in NICs as set out above. From April 2023, NICs will reduce to their previous levels and the Levy will be collected separately.
CAVEAT: BPE are not tax advisors and you should not treat the above as tax advice. For further advice on the above changes, please speak to a specialist tax advisor.
