Dramatic tax rises to fund social care were unveiled by the government this month, sparking criticism from the self-employed and limited company directors. From April 2022, National Insurance Contributions (NICs) will increase by 1.25% for employed and self-employed people earning more than £9,568. A similar increase will also apply to employers’ national insurance payments. From April 2023, the higher NICs rate will apply to people working beyond the state pension age. In a surprise move, Boris Johnson, prime minister, announced an increase in dividend tax — which will rise by 1.25% from April 2022. There were some winners from the policy. People receiving only pension income will not be affected by the changes. Landlords who have not incorporated into a company will also be left untouched, along with investors holding wealth generated from capital growth, as opposed to those receiving dividends. Meanwhile, about 6.2m people earning less than £9,568 in 2021-22 will not have to pay the Health and Social Care Levy. But for many — including about 29m people caught by the NICs increase — the new regime will mean a notable hit to the pocket, with the government itself warning the measures could have an impact on people just about managing to cope financially. The increase in national insurance is focused on workers since it only affects those with employment-related earnings. Currently, employees pay no national insurance on the first £9,568 earned. They pay 12% on earnings up to £50,270 a year, falling to 2% on earnings above £50,270 a year. The increase means employees will now pay a rate of 13.25% in the second band and 3.25% on earnings above £50,270.

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