Prime Minister Boris Johnson announced this week that there will be some changes to National Insurance Contribution (NIC) rates, including rate increases of 1.25% for employees, employers and the self-employed. A summary of the changes revealed by the UK Government and the commencement dates can be found below.
From April 2022
As previously mentioned, National Insurance Contribution (NIC) rates will increase for employees, employers and the self-employed by 1.25%. The first £9,568 of a workers earnings are exempt from National Insurance.
In addition, an additional 1.25% of tax will be paid by workers who receive over £2,000 in dividends per annum. This will affect company directors who pay themselves mainly via dividends and also individuals with large share portfolios.
From April 2023
Working pensioners will pay a ‘Health and Social Care Levy’ of 1.25% on their earnings, but not on their pension income. Those aged 66 and over will only have to pay 1.25% and will not need to pay any further National Insurance.
27th October 2021 – Next Budget
We recommend that you aim to complete large transactions before the next Budget on 27th October 2021 in case the Chancellor announces tax changes with immediate effect from this date. The following should also be considered:
1. Capital Gains Tax Rates
If you are planning to sell an asset, consider completing the transaction ahead of the budget as tax rates may rise to 20% and 40% in line with income tax rates.
2. Tax Relief On Pension Contributions
If you are considering contributing a large amount to your pension before the end of the tax year, you may wish to do so ahead of the Budget.
3. Tax-Free Gift Allowances
Consider making gifts up to your inheritance tax allowance of £3,000 for this tax year and £3,000 for the previous tax year, if you haven’t yet utilised it.