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Do you think National Insurance should be merged with Income Tax? it could happen soon

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The Tax Payer’s Alliance have been  campaigning and it looks like the Chancellor, George Osborne, has agreed that the first step is to re-name National Insurance as “Earnings Tax”. The change is to be proposed in legislation this week.

This story was reported in the Telegraph on 23rd February. There is also an interesting article on Tax Research UK (Richard Murphy).

You pay National Insurance contributions to build up your entitlement to certain state benefits, including the State Pension.

You pay National Insurance if you’re:

  • 16 or over
  • an employee earning above £149 a week
  • self employed and making a profit over £7,755 a year (Class 4) plus £2.70 per week Class 2 NI (you may not have to pay any Class 2 NI if your profits are below £5,725)

If you’re employed, you stop paying Class 1 National Insurance when you reach the State Pension age.

If you’re self-employed you stop paying:

  • Class 2 National Insurance when you reach State Pension age (or up to 4 months after this to pay off any contributions you owe)
  • Class 4 National Insurance from the start of the tax year after the one in which you reach State Pension age

Income Tax is whole different ball game. Whilst I can see its simpler to have one tax the changes that would be required to achieve it would be huge!

Is it worthwhile?

steve@bicknells.net


1 Comment

  1. Kris says:

    I have always thought that NI would be better split into its constituent parts. There should be an unemployment fund and pension fund run by the Government so that unemployment benefit and pensions are not coming out of general taxation but out of a pot which can be earning more money while demand is not as high. The obvious problem is that politicians cannot be trusted not to raid this pot when they need a cash boost for something.

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