NI and dividend tax | 1.25 % points higher from April 2022

National insurance contributions and dividend tax rates will increase by 1.25 percentage points across the whole UK from 01 April 2022.

The effect | Summary

1. Employees

Those of your staff earning above £9,568 (2021/22 rates) will have 1.25% more NI deducted from their pay packets.

So a stylist earning £18,000 pa will be £105 worse off per year.

2. Salon Owners (as employers)

For each of your employees earning above the class 1 secondary threshold (currently £8,840 in 2021/22), it will cost you an additional 1.25% class 1 secondary NIC.

So one of your stylists earning £18,000 pa will cost you another £114.50 per year.

For most of you, the first £4,000 of your employers NI is free (for our Clients we claim this for them).

Dividends

On top of the employers NI, you will also pay an additional 1.25% income tax on any dividends you take from your business from 01 April 2022; taking rates to: 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers.

3. Self employed (chair/space renters)

Those renters with profits above £9,568 (2021/22 rates) will pay an additional 1.25% class 4 (self-employed) national insurance.

Then from 01 April 2023.

From April 2023, the increases will be legislated separately as a “health and social care levy” and NIC rates will return to 2021/22 levels (so you’ll pay NI as usual but have an additional ‘health’ tax to pay of an equivalent amount.