What does the increase in National Insurance Contributions mean for landscape gardening businesses?

From April 2022, employees, employers, and the self-employed are seeing their National Insurance Contributions (NICs) rise by 1.25%. This means employees must pay more in National Insurance on their salaries, employers pay additional contributions for their staff, and the self-employed pay more on their profits. Company director’s dividends have also been affected.

As a landscape gardening business owner, you will need to think about how this increase will impact your business. To help you, we have highlighted the details of the changes in this article.

Employee increases
Employees pay Class 1 contributions. Previously, it started at a rate of 12% on earnings over £184 a week and then 2% on all other earnings above £967 a week.
From the start of April 2022, these rates increased to 13.25% and 3.25% respectively.

Example 1
Employee earning £19k per year
2021/22 – 12% = £1,131.84 total for the year
2022/23 – 13.25% = £1,208.40 total for the year
Annual increase £76.56
Monthly increase £6.38

Example 2
Employee earning £28k per year
2021/22 – 12% = £2,211.84 total for the year
2022/23 – 13.25% = £2,400.90 total for the year
Annual increase £189.06
Monthly increase £15.76

Employer increases
Previously, employers paid 13.8% above £175 a week. This has risen to 15.05% from April 2022.

There is some good news if you are an employer though! From April 2022 the employment allowance has increased from £4,000 to £5,000 per year, so if you are eligible for the employment allowance, you will not pay employers National Insurance on the first £5,000.

Example 1
Employee earning £19k per year
2021/22 – 12% = £1,402.08 total for the year
2022/23 – 13.25% = £1,489.95 total for the year
Annual increase £87.87
Monthly increase £7.33

Example 2
Employee earning £28k per year
2021/22 – 12% = £2,644.08 total for the year
2022/23 – 13.25% = £2,844.45 total for the year
Annual increase £200.37
Monthly increase £16.70

Self-employed increases
If you are self-employed, you may know that you pay two types of National Insurance. Previously, Class 2 contributions were paid on self-employed profits of £6,515 a year at a rate of £3.05 a week. This has increased to £3.15 a week. Also, you will have paid Class 4 contributions on taxable self-employed profits of 9% between £9,568 and £50,270, then 2% on anything above £50,270. This has risen to 10.25% and 3.25% respectively.

Example 1
Self-employed profits £30k per year
2021/22 – Class 4 9% and Class 2 £3.05pw = £1,997.48 total for the year
2022/23 – Class 4 10.25% and Class 2 £3.15pw = £2,226.10 total for the year
Annual increase £228.62
Monthly increase £19.05

Example 2
Self-employed profits £50k per year
2021/22 – Class 4 9% and Class 2 £3.05pw = £3,797.48 total for the year
2022/23 – Class 4 10.25% and Class 2 £3.15pw = £4,276.10 total for the year
Annual increase £478.62
Monthly increase £39.89

Company director increases
Company directors have also been affected by a 1.25% increase in tax on their dividends.
The dividend tax rate for basic-rate income taxpayers has increased from 7.5% to 8.75%, and for higher-rate taxpayers from 32.5% to 33.75%. The dividend allowance has stayed the same for another year and is £2,000 for each director per year.

Example
Director’s dividends £30k per year
2021/22 – 7.5% = £2,100 total for the year
2022/23 – 8.75% = £2,450 total for the year
Annual increase £350
Monthly increase £29.17

More changes to National Insurance are on the horizon and are due to take place in July 2022. We will keep you posted.

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