Prime Minister Boris Johnson has suggested a variety of tax increases for taxpayers around the country.
The Prime Minister's announcement of a 1.25 percent increase in National Insurance Contributions (NICs) from April 6, 2022, was not entirely unexpected, but the increase appears to be larger than it originally appeared.
NICs - beginning April 6, 2022, a 1.25 percent increase in primary and secondary class 1 NICs (i.e. employers and employees) and class 4 NICs (i.e. self-employed) for one year only.
Class 1A and Class 1B NIC rates have increased by 1.25 percent. Certain Benefits in Kind (BIK) and PAYE Settlement Agreements are affected. From April 6, 2022, the rate will be 15.05 percent (currently 13.8 percent ). This will apply for a year only, from April 6, 2022, to April 5, 2023.
The levy will be 1.25 percent of wages, but unlike the NIC rise, it will apply to everyone who works, including those who have reached state pension age. The levy will be displayed individually and will begin on April 6, 2023.
From April 6, 2022, the dividend tax will increase by 1.25 percent.
This means that beginning April 6, 2022, dividend tax rates for basic rate taxpayers will be 8.75 percent, 33.75 percent for higher rate taxpayers, and 39.35 percent for additional rate taxpayers.
How much extra will I have to pay?
An average basic rate employee who earns £20,000 per year will contribute an extra £130 per year. Meanwhile, a typical higher-rate employee earning £80,000 per year will pay an additional £880 per year in taxes.
Employers will be required to pay the tax for employees earning more than the National Insurance Secondary Threshold, which is £8,840 in 2021-22. From April 20, 2022, existing reliefs will apply to employers of apprentices under the age of 25, all employees under the age of 21, veterans, and new employees in the Freeports.
Overdraft loan accounts for Directors are also affected by this increase (and loans to participants). From April 6, 2022, the tax rate payable by a company on a director's overdrawn loan account would increase from 32.5 percent to 33.75 percent.
Contact Taj Accountants
Our specialist Accountants in London with their years of experience working with thousands of contractors can provide you advice and tips on getting started as a contractor. They can also help you save taxes and improve cash flow. So, contact us and get on board.
DISCLAIMER: The purpose of the blog is to provide information and insight regarding the situation. The readers must contact experts before making any decisions based on the information. We highly appreciate you contacting Taj Accountants for further assistance.