National Insurance & Dividend Tax Increases from 6 April 2022

As the country suffers from high inflation and increasing fuel prices the proposed increase in National Insurance and Dividend Taxation are expected to go ahead next month. The Health and Social Care Levy will then replace these increases and will apply from April 2023.

The increases to National Insurance Rates of 1.25% will apply to Employer’s National insurance Contributions, Employees’ National Insurance Contributions and to the Self-Employed for their class 4 National Insurance Contributions.

Businesses will need to budget for the increase in their payroll costs as these will increase, whilst employees will have lower take-home pay as a result.

Employers will need to consider if there are alternative strategies that they can use to reward employees that do not attract National Insurance Contributions and although these may not all be appropriate they could be considered. The benefits when combined with a salary sacrifice arrangement could provide savings for both the employee and employer. The most common benefits are Pensions, Healthcare, Life Insurance and Cycle to Work.

It is not only employers, employees and the self-employed who are hit by this, but also those receiving dividends as the tax rate on dividends is also increasing as follows:

	Current	From 2023
Basic Rate Tax	7.5%	8.75%
Higher Rate Tax	32.5%	33.75%
Additional Rate Tax	38.1%	39.35%

 

If you would like to understand how this affects you, please speak to your local partner on 0330 088 7111.