From April 2022, National Insurance (NI) is expected to go up by 1.25% for workers.

How does this affect self-employed healthcare locum earnings?

Below we demonstrate the impact you would encounter based on your salary: For employees, earning an income between £9,880 to £50,270 will attract an NI of 13.25% instead of the pre-rate of 12%. Likewise, income generated over £50,270 will attract an NI of 3.25% from 2%.

Locum trading under a limited company structure will not be affected by the increase in NI as their salary is generally set at the primary threshold (£9,880 for 2022/23); at this amount, no NI is due.

It is for those locums who pay themselves more than £823 (2022/23) per month, that they will see a reduction in their net pay.

How will this impact employers?

Unfortunately, this increase in NI is not only going to impact employees but also employers. Currently, Employer National Insurance is standing at 13.8% and is expected to rise to 15.05%.

This will apply to all staff who are paid more than the primary threshold. It will be a double whammy for those locums assuming responsibilities as the sole director of their companies and having a salary above the determined.

Will locums who take a low salary be affected by this rise?

In short, yes. This is because dividend rates are also increasing. Every year, people are also awarded a dividend allowance of £2,000. However, dividend income exceeding the allowance is subjected to tax payment.

Luckily the dividend allowance has not changed, however, the dividend tax charge will also observe an increase by 1.25% as well. From the 2022/23 tax year, basic rate dividend tax will be charged at 8.75% instead of 7.5% this year.

Higher rate dividend taxpayers will be charged 33.75% instead of 32.5% and additional rate dividend taxpayers will pay 39.35% instead of 38.1% respectively.

This increase could mean a revisit on how much salary one would want to extract from their company, since salary is a tax-deductible expense and dividends are not.

Source: Optician Online Author: Mo Chaudhry 2022

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Locate a Locum Team