New Tax and NIC rates from April 2022

From April 2022, the National Insurance Contributions (NICs) and dividend tax that you pay will be increasing by 1.25% for one year only.

What Is the Increase For?

This increased contributions will be spent on the NHS and social care across the UK;with the aim of funding £12 billion worth of investment to clear backlogs and resolve issues around care costs.

National Insurance Increases 2022

The 1.25% increase will be applied to employees, employers and the self employed, covering Class 1, 1A, 1B and 4. This levy will not apply to Class 2 or 3 NICs, and the state pension age will not be impacted by these changes.

Income Tax Increases 2022

There will also be a 1.25% increase on the rate of income tax paid by people who receive dividend income from shares from April 2022. The dividend tax is applicable on dividend income above the £2,000 allowance, and above the £12,570 personal allowance. Dividends on assets held in ISAs are excluded from the dividend tax.

How Will This Be Collected?

This new increase will be collected through the current reporting and collection procedures for NICs. 

Changes Coming in 2023

From April 2023, the 1.25% increase will be replaced by a new Health and Social Care Levy, meaning NIC rates will return to their current levels (2021/22). The new levy will apply to individuals working above State Pension age.

From 2023, basic rate dividend tax will be increased to 8.75% from 7.5%. Higher rate dividend taxpayers will be charged 33.75% instead of 32.5% and additional rate dividend taxpayers will pay 39.35% instead of 38.1% respectively.

What Does This Mean For You?

As well as paying an employer National Insurance Contribution, employers are responsible for deducting income tax and National Insurance from their  employee’s wages. 

Employers must ensure that their payroll teams are aware of these changes  and implement them correctly.  Using quality payroll software can help to ensure that employers handle these changes easily and efficiently.

Stay compliant with James & Uzzell

Our friendly team can help you to choose an accounting software that suits your needs, helping your payroll team to react to these changes with ease. Contact us now to find out more.