On Tuesday 7th September 2022, the Government unveiled their “Building Back Better: Our Plan for Health and Social Care” proposal, which sets out the tax increases that will come in to effect in April 2022, to financially aid our health and social care systems.
Full details can be found in the following document and we have provided a high level summary below:
From April 2022, the following tax changes will be applied UK wide:
- All dividend income tax rates will increase by 1.25% i.e. the new bands will be 8.75%, 33.75% and 39.35% but the £2k tax free allowance will remain.
- A Health and Social Levy will be introduced resulting in a rise of 1.25% on National Insurance Contributions (NIC) across the board for employees, employers and the self-employed i.e.
+ Employees rates (Class 1) will rise to 13.25% and 3.25%.
+ Employers rates (Class 1) will rise to 15.05% but the Employment Allowance can interact with this rise.
+ Self-employed (Class 4 but not Class 2 or Class 3) will rise to 10.25% and 3.25%.
From April 2023, for those individuals who are of state pension age but still working (i.e. employed but not clear if also self-employed) will also be impacted by the changes and it will be charged as a separate Levy (once HMRC's systems are updated).
It is not clear if the NIC changes will also impact Class 1A rates.
Tax Planning Thoughts:
- Companies: Accelerate dividend tax payments pre-April 2022.
- Self-employed: Delay capital spending that qualifies for capital allowances until after April 2022 to reduce the impact of the NIC changes but consider the impact of the reduction to the AIA limit from 31 December 2021.
Spending Review & Autumn Budget:
The Government also yesterday announced a Spending Review on Wednesday 27 October alongside an Autumn Budget. To ensure you get out latest thoughts and insights on what this might mean for you / your business, please ensure you follow us on LinkedIn, or subscribe to our newsletter by clicking here.