Impact on employees and employers
In April 2022, National Insurance increased by 1.25 percentage points due to the introduction of the “Health and Social Care Levy.” This 1.25 percentage point increase impacted both the national insurance employees pay, and the national insurance employers pay.
However, at the mini budget on Friday the 23rd of September 2022, the Chancellor announced the removal of the 1.25 percentage point increase from 6 November 2022.
According to the government, the impacts of removing the surcharge are:
- Basic rate taxpayers will on average see a gain of approximately £75 in 2022-23 rising to £175 in 23-24.
- Higher rate taxpayers will gain on average approximately £300 in 2022-23 rising to £700 in 23-24.
- Additional rate taxpayers will gain on average approximately £1,650 in 2022-23 rising to £3,890 in 23-24.
- Small businesses will see their national insurance liability on average by £4,200.
- Medium sized businesses will see their national insurance liability on average by £21,700.
Impact on the self-employed
Self-employed people and company directors will pay a blended rate of National Insurance – taking into account the changes in rates throughout the year – when they submit their annual self-assessment return.
Impact on dividends
From April 2022 the government increased the rate of dividend tax by 1.25 percentage points. However, as a result of the mini budget, this increase will be reversed from April 2023.
For more blogs, check out: newtonaccountants.co.uk/blog