National Insurance Contributions To Rise – What Does This Mean?

Earlier this week it was announced by Prime Minister Boris Johnson that from April 2022 National Insurance rates are to raise by 1.25 percentage points to bring extra funding to the NHS

Earlier this week it was announced by Prime Minister Boris Johnson that from April 2022 certain National Insurance (NI) rates are to raise by 1.25 percentage points to bring extra funding to the NHS in order to help with the current crisis within the social care system. This social care levy will be payable by all working adults, this includes workers over the state pension age.

The increase will apply to Class 1 National Insurance Contributions (NICs) which is paid by employees, and will apply to Class 4 NICs which is paid by the self-employed.

If you’re employed…

Currently, employees pay Class 1 NI Contributions, which is 12% on their earnings between £9,568 and £50,270, and then 2% on any income over £50,270.

In line with the NI rise, the tax rates will increase to 13.25% and 3.25%.

Example of how your NI contributions would look following the rate increase:

If you’re self-employed…

Workers who are self-employed pay Class 2 & Class 4 NICs on their profits.

Class 2 is paid if your profits are £6,515 or more a year, which is £3.05 per week.

Class 4 is paid if your profits are £9,569 or more a year. 9% on profits between £9,569 and £50,270. 2% on profits over £50,270.

Only Class 4 NICs will be increased with the NI rise, Class 2 will NOT be impacted. Class 4 NICs will be increased to 10.25% main rate and 3.25% higher rate.

Dividend tax rates will also increase by 1.25% from April 2022.

 

 

If you need help with further understanding of how this will impact you, get in touch with us at hello@bkplus.co.uk

Accounting & Business Services Payroll Personal & Corporate Tax Advisory
John Doe

John Doe

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