From April 2022 certain National Insurance Contributions (NICs), paid by both employed and self-employed workers, and dividend tax rates will both rise by 1.25% in an effort to help fund the cost of health and social care.

NIC rate changes

From 1 April 2022, there will be a temporary 1.25 percentage point increase in class 1 (employee) and class 4 (self-employed) NICs paid by workers, as well as a 1.25 percentage point increase in class 1 secondary NICs paid by employers (so 2.5% in total).

From 2023, the health and social care levy element will then be separated out and the exact amount employees pay will be visible on their pay slips. Unlike other NICs, it will be paid by all working adults, including workers over the state pension age.

An employed basic rate tax payer earning the median basic rate taxpayer’s income of £24,100/yr in 2022/23 would pay £180/yr, while a higher rate taxpayer earning the median higher rate taxpayer’s income of £67,100/yr in 2022/23 would contribute £715/yr.

Dividends tax changes

Individuals will see a 1.25% increase in dividends tax rates from 1 April 2022, taking rates to:

  • 8.75% for basic rate taxpayers;

  • 33.75% for higher rate taxpayers and;

  • 39.35% for additional rate taxpayers

The £2,000 dividend allowance will remain.

The government estimates that 70% of the revenue raised will be paid for by additional and higher rate taxpayers in 2022/23.

Let’s talk

If you would like to discuss anything in the above article in the context of your own circumstances, get in touch with our tax team on 01788 539000 or 0116 261 0061.


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