Here’s what’s happening:
- NICs will increase by 1.25% from April 2022. 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. It will be paid by all working adults, including those over the state pension age – unlike other NICs.
Downing Street says a typical basic rate taxpayer earning £24,100 would contribute £3.46/week, while a higher rate taxpayer on £67,100 would pay £7.15/week.
It’s unclear if this change will take force UK-wide but NICs rates aren’t currently set on a devolved basis. We’ve asked the Government and we’ll update this story when we know more. We’ve also asked if this rise will apply to self-employed workers who pay different NICs rate (see below for more on this).
- Dividend tax rates will rise by 1.25%. This is a tax on money given to you by a company you hold shares in, usually when it’s made a profit. After the £2,000 tax-free allowance, the current dividend tax rate is 7.5% for basic rate taxpayers (it’s more for higher and additional rate taxpayers). Again, we’ve asked if this change will come in on a UK-wide basis.
The government says funds raised by these increases will go towards helping the NHS clear backlogs, as well as resolving long-standing issues around care costs. From October 2023, anyone with assets under £20,000 will have their care costs fully covered by the state, while those with between £20,000 and £100,000 will be expected to contribute to their costs but will also receive state support.
For full info on current NICs and dividend tax rates, see our Tax Rates 2021/22 guide. You can also use our Income Tax Calculator to work out your current take home pay.
Most UK workers have national insurance deducted from their pay
Most UK workers currently pay NICs to fund different parts of the state benefits system-from state pensions to health and social care and unemployment benefits. The amount of NI you pay depends on your salary and type of employment. There are four’classes’ which determine your employment and contribution type, as seen in the table below: