Dividend Tax and National Insurance Increase
As many of you may be aware, the government announced today that as of April 2022, both dividend tax and National Insurance will be increased by 1.25%.
This is the biggest UK tax increase in 28 years meaning that someone earning £30,000 would be paying an extra £250 in tax per year, including the self employed.
The current dividend allowance is set at £2,000 meaning that dividends totaling £2,001 and over will be taxed. Dividends from shares in an ISA are tax-free. Your ISA allowance during one tax year (6 April to 5 April) is set at £20,000. Once the new tax year starts, you get a new ISA allowance meaning that any allowance unused in the previous year will go to waste.
The increase is set to fund the NHS and social care reform, the Prime Minister’s plans include:
- A 1.25% increase in National Insurance (NI) and dividend tax from April 2022
- From April 2023, the NI increase will be reversed and a health and social care levy will be introduced instead, meaning that pensioners who are still earning will also need to pay.
- In return, there will be a limit of £86,000 on social care costs.
- People will not pay social care when their assets are below £20,000 and there will be a means test between £20,000 and £100,000.
As always we will explore ways to mitigate the impact that this decision has on our clients.
If you require any further information then please do not hesitate in contacting us.