NEWS UPDATE
On 7 September 2021 Boris Johnson announced that NI and dividend tax rates will be hiked to help fund social care, pay for COVID-19 support and help the NHS backlog.
In todays Shipleys Tax brief we look at 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. This will mean slightly higher taxation for company shareholders extracting income via dividends. However it remains to be seen how tax efficient this route still is compared to other remuneration strategies given the NIC hike above.
If you would like to know how you are personally affected by the above measures and you’re options going forward, please contact us on 0114 272 4984 or email info@shipleystax.com.
Please note that Shipleys Tax do not give free advice by telephone or email.
