Latest Tax Increases on NIC & Dividends worse than first thought!
Last week, the prime minister announced a 1.25% rise in National Insurance Contributions (NICs) and dividend tax to pay for health and social care. The changes are due to commence from 6 April 2022. It is now clear that the tax rises are more widespread than they first appeared.
Dividend tax will increase by 1.25% from 6 April 2022.
A wider consequence of this is in respect of loans to participators in close companies. This will impact those who have overdrawn directors' loan accounts. The punitive s.455 rate (on overdrawn directors loan accounts) will from 32.5% to 33.75%. Further reason to not become overdrawn on your directors loan account!
We are awaiting to see whether there will be any changes to the tax free dividend allowance, fingers crossed they will remain untouched...
An increase in 1.25% in primary and secondary Class 1, and Class 4, NICs from 6 April 2022.
The surcharge of 1.25% will also apply to those individuals working above the state pension age who currently do not pay NICs.
Last week HMRC updated their guidance covering rates and thresholds for employers. This update makes it clear that the 1.25% increase will also apply to other types of NICs including Class 1A NICs on Benefits in Kind and Class 1B NICs in respect of PAYE settlement agreements. In both cases, the current 13.8% rates will become 15.05% from 6 April 2022.
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