The 1,25% increase in NIC contributions from April 2022 will be mirrored by a similar increase in the tax charge on dividends. From April 2022, the dividend tax increases will apply as follows:
- Basic rate taxpayers will see an increase from the present 7.5% to 8.75%.
- Higher rate taxpayers will see an increase from 32.5% to 33.75%.
- Additional rate taxpayers will see an increase from 38.1% to 39.35%.
This change will apply UK-wide. It will be scored at the Budget and legislated for in the next Finance Bill.
Dividend tax is charged on taxable dividend income an individual receives that falls outside of the personal allowance (£12,570 in 2021-22) and the dividend allowance (£2,000 in 2021-22). Taxable dividend income excludes, for example, dividends on assets held in ISAs.
Affected basic rate taxpayers are expected to pay, on average, an additional £150 on their dividend income in 2022-2314 . Affected higher rate taxpayers are expected to pay, on average, an additional £403 on their dividend income in 2022-23. Additional and higher rate taxpayers are expected to contribute over 70 per cent of the revenue from this increase in 2022-23.