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Pytronot UK Limited and Pytronot Construction Limited are part of the  Diamond Family Group and associated companies 

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Are National Insurance Contributions the Ultimate Stealth Tax?

June 27, 2017

It has been reported that, “National Insurance (NICs) contributions are the ultimate stealth tax!” but how true is this statement?

 

This fund was designed as a safety net for the nation’s workers who could claim on the money if they fell on hard times or needed medical treatment. However, over the years it has become less of a support system and more of an income tax. By default, it has been levied before pay so employees lose 12pc of their income above £153 a week to the fund, and 2pc above £805.

 

 

Officially, the Government defines this fund as a resulting pot of money still serving three specific purposes: funding the NHS, paying state pensions and ad-hoc employment-related payouts such as incapacity benefits.

 

However, Sir James Mirrlees noted that: “National Insurance is not a true social insurance scheme.” Instead, he argued it was “just another tax on earnings” that invites politicians to play with it, failing to acknowledge that this is an essentially part of the taxation of labour income.

 

George Osborne has proposed to the Office of Tax Simplification (OTS) that National Insurance and Income Tax should remain separate, or if not they should be better aligned.

 

It’s not difficult to see why Osborne wanted a softer approach to National Insurance and Income Tax. Based on yearly earnings, Income Tax is extremely different from National Insurance, which is based on weekly earnings.

 

If you’re confused by this or other tax, Pytronot are experts in HR and payroll services who have a number of years of experience within the industry and are on hand to help make the process easier.

 

To speak to one of the team, call 0203 763 8666 or email solutions@pytronot.co.uk

 

 

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