NI rates hiked - how much more will workers pay?

Earlier today (7 September) Boris Johnson announced that NI and dividend tax rates will be hiked to help fund social care, pay for coronavirus support measures and clear the NHS backlog. Who will be affected and by how much?

NI rates hiked - how much more will workers pay?

Firstly, NI rates will increase by 1.25% from April 2022. This will apply to both primary and secondary Class 1 contributions, which will increase to 13.25% and 3.25% for earnings up to, and above, the upper earnings limit respectively. Class 4 rates will also increase to 10.25% and 3.25%. The additional 1.25% will be carved out as a separate levy from April 2023 - essentially it will be a new tax.

To illustrate what this will mean for employees, the following table is a useful reference, assuming the current NI thresholds apply:

Salary

Current NI bill

Expected increased NI bill

Change

£15,000.00

£651.84

£719.74

£67.90

£25,000.00

£1,851.84

£2,044.74

£192.90

£35,000.00

£3,051.84

£3,369.74

£317.90

£45,000.00

£4,251.84

£4,694.74

£442.90

£55,000.00

£4,951.84

£5,519.74

£567.90

 

Secondly, the dividend tax rates will also increase by 1.25%, i.e. to 8.75%, 33.75% and 39.35% for basic, higher and additional rate taxpayers respectively.

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