Sunak says the planned 1.25% rise in national insurance contributions must remain, as a “dedicated funding source” for health and social care. In 2022/23 the rate of primary Class 1 NICs for employees charged on their earnings, the rate of secondary Class 1 NICs for employers charged on their employees’ earnings, and the rate of Class 4 NICs for the self-employed charged on their trading profits, will be increased by 1.25%.
There are also changes to dividend tax which is also increasing by 1.25% from 6th April 2022. The government says that it hopes to raise £0.6bn from the raise to dividend tax rates. The new dividend rates are:
|Tax band||2022-23||Current rates|
However, the Chancellor announced he will increase the primary NIC threshold by £3,000, up from a planned rise of £300. This equalises national insurance contributions threshold with the personal allowance of £12,570. He calls it “a £6bn personal tax cut for 30m people, and the largest single personal tax income in a decade”.
Starting in two weeks’ time the employment allowance for small businesses is to increase to £5,000, a tax cut worth up to £1,000 for half a million small firms.
In an unexpected move the Chancellor announced he will fulfil their manifesto pledge with a cut to basic rate tax from 20% to 19% in 2024. This will be the first cut in income tax for 16 years. Sunak said “Tax cuts must be paid for, they must be prioritised and they must fit the economic circumstances of the time,”