National Insurance to increase from April 2022

The rates of National Insurance Contributions (NICs) are due to increase by 1.25 percent from April 2022. As a result of this increase it means that employees will pay 13.25% NICs instead of the current rate of 12%. The employer NICs rate will also increase from 13.8% to 15.05%.

Currently, self employed individuals pay Class 4 NICs at a rate of 9% on profits over the NI threshold (currently £9,568), however the increase means that from April 2022 they will pay 10.25% on all profits over the threshold (£9,880 for 2022/23). The rates of Class 2 NICs will also increase from £3.05 per week to £3.15 per week for 2022/23 and will apply to all individuals with annual self-employed earnings over £6,725.

The rates of tax paid on dividends are also due to increase by 1.25 percent from April 2022. This means that anyone receiving dividends will pay 8.75% basic rate tax or 33.75% higher rate tax on their dividends (previously 7.5% and 32.5% respectively).

There will be further changes from April 2023 where the additional 1.25% NICs is replaced by the Health and Social Care Levy. The NICs rates will return to their original levels, with the additional 1.25% treated as a separate levy, which will also apply to individuals over the state pension age.

Please contact us if you require further information or visit the Gov.uk website https://www.gov.uk/national-insurance-rates-letters.