The October 2021 Budget was described as a Budget for the new post Covid economy, but was somewhat of a non-event, with just about all the business and personal tax changes either pre-announced or leaked
Social Care Levy – an extra 1.25% on NIC and Dividend Tax from April 2022
Not least amongst those pre-announced changes was the 1.25% increase in NIC and Dividend Tax, now set to come into force from 6 April 2022.
This will initially be based on National Insurance contributions (NICs) and will also see an identical increase in dividend tax rates. The increased NIC charge of 1.25% will apply to employees (including above state pension age), employers and self-employed Class 4 contributions.
The “Social Care Levy” aims to raise £12bn a year in a significant retreat from the Conservatives’ December 2019 manifesto pledge committing not to raise the rates of income tax, national insurance and VAT.
By adding 1.25% to both NIC and Dividend Tax this makes it a very real tax increase for just about everyone, whether they are self-employed, employed or a business owner.
The Government is coming under severe pressure at present to cancel or defer the new taxes, but both the Prime Minister and The Chancellor are standing firm for now.
Combined with significant increases on the National Minimum and Living wages from April 2022, along with apparent significant rises in domestic fuel prices, the post Covid UK economy is set to face significant inflationary increases.
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