National Insurance & Dividend Increase

National Insurance Increase of 1.25%

What is National Insurance?

National Insurance is a tax that funds services including the NHS, maternity, sick and bereavement pay, and the state pension. It is paid by those who are earning, and people stop paying when they reach the state retirement age. The amount paid depends on what people earn.

People pay mandatory national insurance if they are over 16 and;

  • An employee earning above £184 a week.
  • Self-employed and making a profit of £6515 or more a year.

From April 2022 to April 2023 there will be a temporary 1.25% increase in Class 1 and Class 4 national insurance which will have to be paid by employees, employers and self-employed individuals earning over the primary threshold/lower profits limit, currently £9,568.

The New Rates Are:

Tax Years

Employee

Class 1 NICs

Employers

Class 1 NICs

Self-Employed

Class 4 NICs

2021/22 12%/2% 13.8% 9%/2%
2022/23 13.25%/3.25% 15.05% 10.25%/3.25%
Threshold (£797.01 to £4189 per month) (£737.01 to £4189 Per Month) 10.25% on profits between £9569 and £50,270 then 3.25% on profits over £50,270
2023/24 12%/2% 13.8% 9%/2%
Health & Social Care Levy from 2023/24 1.25% 1.25% 1.25%

How much more NI will I Pay?

Employee Class 1:

If you earn £20,000 Gross per year in 2021/22 you will have paid £1,252. If you earn the same amount in 2022/23 you will now pay £1383. An increase of £131 per year.

Employer Class 1:

For the same example of £20,000, the employer will now have to pay 15.05%, this is £1679 from the 13.8% in 2021/22, an increase of £139 per year.

2023/24?

The government will introduce a UK-wide 1.25% health and social care levy based on NICs ring fenced to fund the investments in health and social care.

This 1.25% increase will then become a separate tax on earned income from 2023 appearing on an employee’s payslip as a Health & Social Care Levy.

This levy unlike National Insurance will also be paid by state pensioners who are still working.

Dividend Increase of 1.25%

From April 2022 tax on Dividend income will increase by 1.25% which are payable on dividend earnings of above £2,000 per year.

This is to help support the NHS and Social Care.

Tax Years Basic Rate Tax Payers High Rate Tax Payers Additional Rate Tax Payers
2021/22 7.5% 32.5% 38.1%
2022/23 8.75% 33.75% 39.35%

Advice and Guidance

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