National Insurance and dividend 1.25% uplift underway




The Government has at last increased National Insurance (NI) and dividend tax by 1.25 percentage points after months of anticipation.


The 1.25% uplift came into effect on 6 April 2022 and will apply until April 2023, after which a separate health and social care levy will apply on peoples’ income at 1.25%.


The Government said it expects the levy to raise £39 billion over the next three years to help reduce the Covid-induced NHS backlog and reform adult social care.


The change means employees will pay NI at 13.25% on their earnings above the primary threshold up to £50,270 a year and 3.25% of earnings above that in 2022/23.


Some employees are exempt from the uprate in certain circumstances, including apprentices under 25 years old, employees under 21 years old, armed forces veterans and freeport employees.


Employers will pay 15.05% on earnings above £9,100 and the self-employed will pay 10.25% above £11,908.


Some have criticised the Government for going ahead with the plan it first announced in September 2021, saying it is mistimed with the current cost of living crisis as inflation runs at 6.2%.


However, from July 2022, the point at which individuals pay NI will rise by £2,690 to £12,570 – equal to the income tax personal allowance.


The Government said this means around 70% of taxpayers will end up paying less in NI even when taking into account the 1.25% uplift.


However, Torsten Bell, chief executive of the Resolution Foundation, said lower earners will not benefit as much as others, commenting:


“Middle and higher income households will gain most from the rise in the National Insurance threshold, but only £1 in every £3 of additional support announced today will go to the bottom half of the income distribution.”


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