Government announces National Insurance and dividend tax increases

The Government has announced a considerable investment in both the NHS and Social Care. To fund this investment, the Government have introduced the Health and Social Care Levy from April 2022.

The NHS and Social Care Levy will raise the additional tax as follows:

  • 1.25% increase in National Insurance Contributions from Employers;
  • 1.25% increase in National Insurance Contributions from Employees;
  • 1.25% increase in National Insurance Contributions from the Self-Employed;
  • 1.25% increase in taxation on dividends;
  • Those of pensionable age will also pay the increased 1.25% National Insurance Contribution on any earned income from April 2023.

These tax increases will hit a broad range of taxpayers, from businesses to employees to investors and pensioners. This increased tax will also catch business owners who usually draw their income in the form of dividends.
These changes will lead to higher future costs for all businesses and especially companies, when combined with the 6% increase in Corporation Tax from April 2023. As a result, businesses may need to reduce their payroll or costs elsewhere or consider increasing prices, while individuals will need to think about managing the impact on their personal finances.

As a TC client, you may wish to consider some of the following options:

  • Advice on enhanced tax deductions including:
    • Capital Allowances;
    • Research and Development claims;
    • Patent Box;
  • Drawing down income before April 2022;
  • Advice on HR compliance and taxation implications around redundancies;
  • Employee incentive arrangements and tax-efficient benefits;
    • Review of business costs to identify potential savings;
    • Review of your investment portfolio to non-share investments.

In a separate matter, the Pension Triple Lock has been suspended for one year, given the link with earnings, so there is a double lock on 2.5% and Inflation.

If you would like to speak to us about how best to respond to these changes, please contact Taylorcocks.