In an extreme move by the UK government, it was announced yesterday that National Insurance, and Income Tax on share dividends, will be increased by 1.25%.
The new social care package, which the prime minister has called “the biggest catch-up programme” in the NHS’s history, will be funded through a new ‘health and social care levy’ from April 2022. The changes are set to raise £12bn across the UK and the costs of the programme will be split between individuals and businesses and inevitably “those who earn more will pay more.”
What are the changes?
- National Insurance Contributions (NICs) paid by both employed and self-employed workers will rise by 1.25% from April 2022.
- The increase will apply to Class 1 NICs paid by employees, and Class 4 NICs paid by self-employed workers. It will be administered by HMRC and collected via the current channels for NICs; Pay As You Earn and income tax self-assessment.
This means that an employed basic rate taxpayer earning the basic rate taxpayer’s income of £24,100 a year in 2022/23 would contribute £180 a year, while a higher rate taxpayer earning the higher rate taxpayer’s income of £67,100 a year in 2022/23 would pay £715 a year.
Dividend tax rates will also rise by 1.25% from April 2022. This is a tax on money received from a company you hold shares in, and where you receive your remuneration via dividend distribution.
What does this actually mean?
The new government announcement means that between 2022 and 2023, National Insurance rates will rise by 1.25 percentage points, from 12% to 13.5%. Employers will also be subject to the rise, increasing Employers National Insurance from 13.8% of Gross Salaries, to 15.05%.
The impact on small businesses
Those most notably affected by the new National Insurance increase will be small businesses. After an incredibly difficult 18 months with lockdowns, furlough and business closures, this increase in taxes could well be the final nail in the coffin. In fact, it’s estimated that these latest increases could cost UK businesses £3.5bn, in a time when the economy and employers are already struggling.
Mike Cherry, chairman of the FSB, told the Daily Telegraph: “This regressive levy is yet another outgoing for small businesses and sole traders to worry about against a backdrop of spiralling input prices, supply chain disruption, a deepening late payment crisis, rent arrears, rates bills returning, skills shortages and emergency loan repayments.”
How can Auria help?
As a small business owner facing economic and legal changes, one of the best things you can do is find someone to help and guide you along the way.
And that’s where Auria come in.
We can help guide you through what the new tax laws mean for your business and your employees. So why not reach out to us to see how we can help you by emailing firstname.lastname@example.org or giving us a call on +44 (0)20 7291 1000.