National insurance is a tax on labour. Two taxes, in fact. Running three slightly different income tax systems is a century-old relic that should have no place in a modern, transparent tax system. National Insurance should be abolished in three phases:
1. Transparency now. First, at this year’s autumn statement, a transparency phase should be announced which requires the employer charge to be printed on pay-slips and changes the name of the employee and employer charges to ‘earnings tax’ and ‘wages tax’.
2. Simplification in 2019. Secondly, budget 2018 should announce a simplification phase which would align national insurance rules with income tax, removing most of the differences and coming into effect from 2019.
3. Abolition in 2021. Finally, budget 2020 should announce the full abolition of both charges from 2021, while raising income tax, effectively merging them into a single income tax. A transitional rate for those born before 1965 would ensure nobody pays more.
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