NI rates hiked - how much more will workers pay?
Earlier today (7 September) Boris Johnson announced that NI and dividend tax rates will be hiked to help fund social care, pay for coronavirus support measures and clear the NHS backlog. Who will be affected and by how much?
Firstly, NI rates will increase by 1.25% from April 2022. This will apply to both primary and secondary Class 1 contributions, which will increase to 13.25% and 3.25% for earnings up to, and above, the upper earnings limit respectively. Class 4 rates will also increase to 10.25% and 3.25%. The additional 1.25% will be carved out as a separate levy from April 2023 - essentially it will be a new tax.
To illustrate what this will mean for employees, the following table is a useful reference, assuming the current NI thresholds apply:
|
Salary |
Current NI bill |
Expected increased NI bill |
Change |
|
£15,000.00 |
£651.84 |
£719.74 |
£67.90 |
|
£25,000.00 |
£1,851.84 |
£2,044.74 |
£192.90 |
|
£35,000.00 |
£3,051.84 |
£3,369.74 |
£317.90 |
|
£45,000.00 |
£4,251.84 |
£4,694.74 |
£442.90 |
|
£55,000.00 |
£4,951.84 |
£5,519.74 |
£567.90 |
Secondly, the dividend tax rates will also increase by 1.25%, i.e. to 8.75%, 33.75% and 39.35% for basic, higher and additional rate taxpayers respectively.
Related Topics
-
HMRC loses employment status case involving football referees
HMRC has lost another employment status case, this time involving football referees engaged by Professional Game Match Officials Ltd (PGMOL). The tribunal rejected HMRC’s argument that the referees should be treated as employees for tax purposes. Why does the decision matter?
-
Investing: loans vs shares
You have the opportunity to invest in a promising start-up company. You can either purchase shares or lend it the money. What are the potential tax consequences you need to factor in when making your decision?
-
Where can you get help with MTD quarterly updates?
As Making Tax Digital for Income Tax (MTD IT) filing obligations begin for some taxpayers, questions are continuing to arise around quarterly updates and how problems should be resolved. If issues occur, where should you go for help?