Government Plans for increases in National Insurance
The Government confirmed yesterday that from April 2022, a 1.25% Health and Social Care levy will be introduced.
It is nominally taking the form of a 1.25% increase in National Insurance both for employees (Class 1) and Self-Employed (Class 4) with a similar increase for employers as well.
There will be no further opportunities for saving this levy by using dividends in limited companies as there is also a 1.25% increase in dividend tax rates.
This increase also applies to highest rates possible so that successful companies who reward their directors with dividend income over £150,000 will effectively be paying tax, once corporation tax has been taken into account at 58.85% on that marginal income.
If the planned corporation tax rise to 25% comes in as well, then owner managed businesses in that bracket will then be paying tax at 64.85%. However, there will be undoubtedly other changes between now and the time of full implementation of the increased corporation tax rate and we will keep you posted and continue to optimise your tax planning opportunities.
The rise is ostensibly linked to improving social care so that from October 2023 nobody starting care will pay more than £86,000 in their lifetime and no one with assets less than £20,000 will have to make any contribution from their savings or housing wealth.
