Dividend Tax Rise & National Insurance Hikes from April 2022

DIVIDEND tax rise and National Insurance hikes have been announced by the Government to help fund the ever-growing NHS and social care bill. Here is how much more people will pay in dividend tax from April 2022

Prime Minister Boris Johnson announced his Government’s intention to address a Conservative manifesto promise to improve the UK’s social care system. But in doing so, Mr Johnson also announced his Government will be breaking another manifesto pledge, by declaring an increase of 1.25 percentage points on the rate of National Insurance and tax on dividends.

Despite widespread opposition to the move, Mr Johnson said the tax hike was necessary and would see £36billion raised over three years.

The Government could collect £600million due to the dividend tax hike alone, according to financial experts.

“Investors and the self-employed will collectively pay £600million more in tax as a result of the move.

“However, it will be felt the most by company directors, including the self-employed and contractors, who pay themselves via company dividends in addition to salary.”

Many have seen the Government’s decision to hike dividend tax as damaging to self-employed workers. Some of these workers wouldn’t have benefited from Government support packages during the pandemic.

Over the many UK lockdowns, the Self-Employment Income Support Scheme (SEISS) has seen those considered self-employed or members of partnerships eligible for Government support.

Company directors and other self-employed people deemed ineligible for SEISS have received no grants, with many instead dependent on loans to tide their businesses over during lockdown.

IR35 changes were also implemented earlier this year, creating further upheaval for the UK’s self-employed workers and contractors.

Seb Maley, CEO of Qdos, commented on the tax hike: “This is another short-sighted attack from the Government on the self-employed.

“Raising NICs and dividend tax is a move that directly impacts millions of people working for themselves – people who have arguably been hit the hardest by the pandemic.

“Once again, it seems that the smallest businesses are bearing the brunt of tax reform.

“Yet still, it will be the flexibility, dynamism and skills of the independent workforce that the Government needs most to speed up the economic recovery.”