Embargoed: 00:01 Sunday 08 March
Ahead of next week's Budget, the TaxPayers' Alliance (TPA) has been pushing for plans to align national insurance and income tax, streamlining the tax system and saving workers hundreds of pounds each year.
The Conservatives have committed to increasing the national insurance threshold to £9,500 this April, with the "ultimate ambition" of raising it to £12,500. Instead, the government should skip the minor increase and raise the threshold to £12,500 in one big hit next year, matching income tax and aligning the rules, stripping away the needless differences between the two.
National insurance is a second form of income tax. This adds complexity to the tax system, raises accounting costs for employers and makes it harder for individuals to get one, simple number for their marginal rate, disguising how high personal income taxes are in the UK.
Britain's 25,000 page tax code is long overdue a substantial long-term tax reform package to deliver a single income tax, which was first proposed by the TPA in a landmark report from the 2020 Tax Commission.
- Instead of raising the national insurance threshold to £9,500 this April, the government should delay until next year but then increase it fully to £12,500 straight away to match income tax.
- A temporary multiple jobs relief should also be introduced to ensure anyone who might otherwise be worse off from the transition is fully protected for five years.
- Those on the minimum wage working 35 hours a week would pay £298 a year in national insurance, a £461 a year cut for those with a single job. Those on the minimum wage with two jobs now pay no national insurance, so a multiple jobs relief would protect them.
- Seasonal workers on £600 a week working for only nine months a year would pay £1,316 national insurance a year. This is a £721 a year cut, while those working year-round on the same annual income would pay the same, enjoying a £461 tax cut.
Stephen Herring, member of the TaxPayers' Alliance advisory council and former head of tax at the Institute of Directors, said:
"Gradual implementation is clumsy and when you know where you are going on tax policy it is almost invariably better to go for the shortest route, minimising confusing transitional measures.
"There are other challenges ahead, not least the future qualification criteria for the state pension, but in the meantime the government should align national insurance with income tax in one big hit.
"That will allow a smooth process and, ultimately, much simpler taxes.”
TPA spokesmen are available for live and pre-recorded broadcast interviews via 07795 084 113 (no texts)
Media Campaign Manager, TaxPayers' Alliance
24-hour media hotline: 07795 084 113 (no texts)
- Founded in 2004 by Matthew Elliott and Andrew Allum, the TaxPayers’ Alliance (TPA) fights to reform taxes, reduce spending and protect taxpayers. Find out more about the TaxPayers' Alliance at www.taxpayersalliance.com.
- TaxPayers' Alliance's advisory council.
- In November 2019, as part of its reaction to the Conservative Party manifesto launch, the TaxPayers' Alliance welcomed the pledge to increase the threshold at which national insurance is paid: www.taxpayersalliance.com/taxpayers_alliance_responds_to_conservative_party_manifesto_launch
- In 2012 the TaxPayers' Alliance released the Single Income Tax, the final report of the 2020 Tax Commission. This proposed merging income tax and national insurance. More information is available here: www.taxpayersalliance.com/the_single_income_tax