The government announced last week a 1.25% increase in Tax and NIC on most regular payouts by companies to help fund spending on health and social care. It was anticipated that this move would raise up to £12 bn a year.
Dividends
Under the plans investors can still earn up to £2,000 each year in dividends and suffer a zero rate of tax. However, from the 2022/23 tax year onwards, the current rate will rise as follows:
| Currently | ||||||
| up to £2,000 | 0% | |||||
| Basic rate | 7.5% | |||||
| Higher rate | 32.5% | |||||
| Additional higher rate | 38.1% | |||||
| From 2022/23 | ||||||
| up to £2,000 | 0% | |||||
| Basic rate | 8.75% | |||||
| Higher rate | 33.75% | |||||
| Additional higher rate | 39.35% | |||||
This is to be legislated for in the next Finance Bill.
National Insurance Contribution Rates
National Insurance (NIC) is also set to increase by 1.25% in April 2022. The NIC classes affected are:
Class 1 employee, Class 4 self-employed, Class 1 Secondary NIC, Classes 1A and 1B paid by employers.
From April 2023, the increases will be legislated for separately as a ‘health and social care levy’ that will be ring-fenced in law for health and social care and NIC rates should return to 2021/22 levels. This will be legislated for shortly.
Health and Social Care
Under the UK Government’s plans, the amount individuals in England will pay towards personal care throughout their life will be capped at £86,000.
Individuals with assets of less than £20,000 will not make a contribution to care costs from savings or have to look to the value of their homes, whilst those with assets between £20,000 and £100,000 will be eligible for means tested support.
It remains to be seen whether this policy will also be adopted for Wales.
There are a lot of changes afoot and it is clear that good tax planning, be it focussing on income, capital disposals or inheritance tax, has never been more important to help preserve your wealth.
If you have any queries on the implications of these changes for you, please do not hesitate to contact your Kilsby and Williams team member on 01633 810081.