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How much will the NI increase cost you?

Boris Johnson has just announced that National Insurance (NI) and dividend tax rates will be increased to assist with funding social care and clear the NHS backlog. Will you be affected?

From April 2022, NI rates will increase by 1.25%. This will apply to both primary and secondary Class 1 contributions, increasing them to 13.25% and 3.25% for earnings up to, and above, the upper earnings limit respectively. Class 4 rates will also be increased to 10.25% and 3.25%. This additional 1.25% will be classed as a separate levy from April 2023 - essentially becoming a new tax.

The levy will also apply to individuals above State Pension age with employment income or profits from self-employment above £9,568.

Assuming the current NI thresholds apply we set out some workings below to give a guide of what this will actually cost you:

Salary

Current NI liability

Revised NI liability

Increase

£15,000.00

£651.84

£719.74

£67.90

£35,000.00

£3,051.84

£3,369.74

£317.90

£55,000.00

£4,951.84

£5,519.74

£567.90

Dividend tax rates have not been excluded from an increase and will also increase by 1.25%, i.e. to 8.75% for basic rate, 33.75% for higher rate and 39.35% for additional rate taxpayers.

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