The TaxPayers’ Alliance has today released a new video highlighting how the UK’s taxes on people’s wages are needlessly complex and obscure. Produced with the team from See what you mean, the video highlights how National Insurance is a second income tax in all but name.
Previous YouGov polling for the TPA has shown that many people are not aware of how much tax they actually pay. The video makes clear the real rates of tax people pay when Employee’s National Insurance and Employer’s National Insurance are factored in.
Basic: Employer’s NI 13.8 % + Income Tax 20 % + Employee’s NI 12% = 40.2%
Higher: Employer’s NI 13.8 % + Income Tax 40 % + Employee’s NI 2% = 49%
Additional: Employer’s NI 13.8 % + Income Tax 45 % + Employee’s NI 2% = 53.4 %
(See below for an explanation of the combined rates)
Polling has also shown that most do not understand the impact of Employer’s National Insurance, which effectively reduces their wages.
Last year the TPA set out how to abolish National Insurance by 2017, which would make the tax system simpler and more transparent. At the 2011 Budget, the Chancellor indicated a desire to merge Income Tax and National Insurance, which Mr Osborne said would be a “historic step to simplify our tax system and make it fit for the modern age”. Unfortunately, the Treasury has thus far failed to publish the work of the Office for Tax Simplification on this topic or come up with any solid proposals.
Matthew Sinclair, Chief Executive of the TaxPayers’ Alliance, said:
“Taxing the same income three times is a pointless complication which only benefits politicians trying to conceal how much tax people really pay. National Insurance has been nothing more than another Income Tax for years and additional redundant taxes mean higher administrative costs for businesses. The Government can and should merge them into a single tax which would be simpler, fairer and more honest.”
**Calculations** Employer’s National Insurance is added at the rate of 13.8% on top of gross salary. So if you’re paid another £87.87 of gross salary, the employer has to pay an additional 13.8%, which would be £12.13, That adds up to £100.