17/03/2022
Increase in dividend tax rates
From 6 April 2022 the dividend tax rates across all bands will increase by 1.25%. This may be summarised in the table below:
| Tax Band | 2021/22 rate | 2022/23 rate |
| Basic rate | 7.5% | 8.75% |
| Higher rate | 32.5% | 33.75% |
| Additional rate | 38.1% | 39.35% |
Given the changes described you may wish to consider bringing forward dividend payments before 6 April 2022 in order to save income tax on dividend payments.
Before awarding additional dividends you will need to consider how this will affect your taxable income levels. Care must be taken to ensure additional dividends do not inadvertently push you into a higher tax band than first planned.
Increase in national insurance contribution rates
From 6 April 2022 all rates of national insurance will increase by 1.25%.
Therefore, you may wish to consider bringing forward any bonus payments you are considering awarding as it will increase the take home pay of the director/employee and reduce the employer’s NIC bill.
However, as with the point made on dividends care needs to be taken to ensure the payment does not inadvertently push an individual into a higher tax band than first planned.
For more information and to discuss the above, please contact Joe Wilson on 023 8046 1237.
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