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
-
Government rushes through NI cap on pension salary sacrifice
The government has already drafted legislation to impose a £2,000 limit on NI exempt pension contributions under salary sacrifice arrangements. What else do we know?
-
Sneaky change is a blow for side hustles
With most of the media focused on the headline-grabbing announcements from the Budget, a read of the published small print reveals another change coming in 2029. It’s bad news if you are an employee with a side hustle, but what’s going on?
-
Dodging the 2027 IHT and pension changes
In a little over a year the inheritance tax (IHT) exemption for unused pension savings comes to an end. If you’re married or in a civil partnership, one simple step might save your estate thousands in IHT. What is it?