National Insurance to be renamed Earnings' Tax

[longfingernails]

Good. It should really be called "job tax", but earnings tax is OK.

Labour love putting up NI because it is not so visible (especially when paid by the employer directly). Any future Labour government won't be able to do so as easily when it is called the earnings' tax.

[Isitmebut]

Longfingernails…you are not wrong there, as recently as March 2010, just before the General Election, Labour were showing us just how they were looking to ‘create’ private sector jobs and pay down the record annual overspend – and don’t forget they promised in their 2010 manifesto to ‘cut less, tax more’ , so the plan was clearly to ‘tax us to economic growf’.

“Labour's planned National Insurance increase will cost jobs, Alistair Darling admits”

“Labour’s plans to increase national insurance next year (2011 onwards) will cost jobs, Alistair Darling has said.”

www.telegraph.co.uk/news/politics/labour/7539343/Labours-planned-National-Insurance-increase-will-cost-jobs-Alistair-Darling-admits.html

“In his evidence, Mr Darling defended his plans to increase national insurance, saying it was necessary to raise extra money to reduce Government borrowing, which will be £167 billion this year.”



The alternative (after reversing the Labour ‘jobs taxes’), was the plan to REDUCE them to help companies plan ahead and generally stimulate private sector employment, especially where it needs to be targeted.
“Autumn Statement 2013: NI cut to stimulate youth employment”

“UK employers will be incentivised to take on young employees through a National Insurance (NI) contribution cut for under-21s

www.telegraph.co.uk/finance/budget/10498366/Autumn-Statement-2013-NI-cut-to-stimulate-youth-employment.html

“From April 2015, businesses will make a saving on every young person they employ with earnings up to £813 per week.

Tim Stovold, employment tax partner at accountancy firm Kingston Smith, said: “Scrapping NI for the under 21s could save employers up to £4,658 per employee so is a valuable incentive to employ younger workers.”

Around 1.5m jobs for young people will be affected by the cut, saving UK firms £500m a year.”


There were at least other raids via increased National Insurance contributions by Labour, in 1999 and 2002, along with those on Council Tax and fuel, when taxes should have been falling, not going on a fat State of quangos - not so worried about 'the cost of living' back then.

www.dailymail.co.uk/news/article-389284/The-80-tax-rises-Labour.html

[HollyHB]

It is potentially a bad thing for stay at home mums who become widowed or divorced after staying at home to raise children for years. Presently voluntary NI contributions may be made up to six years in arrears for ultimate old age pension entitlement in the event of widowhood (or for any other reason for that matter).

Few will notice or care unfortunately but the few mums affected surely will.

[Isitmebut]

HollyHB...could you please provide links to qualify your statement on a name change penalizing stay at home mums (and carers), as I thought that they were looked after by the coalition last year?

“'I won't be punished for being a mum': The winners and losers in the great state pension shake-up”

www.thisismoney.co.uk/money/pensions/article-2262872/The-winners-losers-great-state-pension-shake-up.html
“Those who will gain the most in the state pension overhaul will be people who have long periods out of employment, such as stay-at-home mothers.”

“From 2017, stay-at-home mothers and carers who look after sick or disabled people will be given a credit against their National Insurance record. This should enable them to claim a full pension.”

[VivaLeBeaver]

So what is the name difference between income and earnings? Surely your earnings are your income?

[soul2000]

Income can be derived from investments ( Correct me if I am wrong) and the taxable rate is much lower due to various clever ways that accountancy works.

[soul2000]

Earnings are not related to Investment Income ( Daft and Complicated) but that's what I think the difference is.

[AnnoyingOrange]

I'm not keen on the idea of merging it with income tax.
At the moment you only pay NI on earnings, not other income such as savings interest and pensions.
How long could we expect that to remain the case if income tax and NI are merged?

[meditrina]

It could have a massive difference on the tax you pay once retired.

Of course, it won't be brought in in time for the current and nearly pensioners. But those under say 45 (maybe even 50) will find this paves the way to paying a lot more tax on the pension they can barely afford to save for in the first place.

[VivaLeBeaver]

Ok, that makes sense.

[Isitmebut]

Meditrina…A combined Income and National Insurance rate of tax is a possibility, if memory serves the Uk Treasury has looked at that in the past - and that was a Ukip policy in their 2010 manifesto and a combined FLAT RATE figure of 31p was mentioned in their manifesto – but quite how that helped the annual deficit, the national debt, or the poor, I don’t know but I’d love to see the math.

So all pure speculation on your part, but as the Conservatives have been a party of trending lower income taxes (over time) during their administration, I’d guess that any merger of the two taxes would be when we could afford to LOWER taxation, not raise it.

Labour promised back in 1997 that they would not raise income tax, because the voters remembered that back in 1979, I believe Labour's lower rate of income tax was 32p, the upper rate was 68p and the tax on income from investments, was in the mid 90%'s repeat 90%'s - hence under Brown National Insurance rises (the Jobs Tax, in Labour parlance) was their way of taxing income.

And the near annual raising of Council Tax and the (then) 1% Flat rate Home Stamp Tax from 1997, a way of taxing wealth.

[meditrina]

Yes, I know I'm speculating. That is why I said it 'paves the way'.

And of course a lower rate of income/earnings tax could mean significantly higher taxation on pensioners, who do not currently pay NI at all once in receipt of state pension but who may still have other earnings. And full merger, even postulating a lower income tax rate under some future Governments, could mean an even bigger rise for pensioners. Or rather, future pensioners.

[Isitmebut]

As the Coalition has just increased the ‘triple lock’ pensions in Brown’s ‘bust’, that he did not get around to doing in his’ boom’, they are not in the business on penalising pensioners, or giving them 72p increases like in 2000 I believe, when our annual finances were sound.

So IF there was a flat rate, it would be thought through, far better than the Brown/Balls raid on Private Pension and Private Sector Final Salary schemes in 1997, that they forgot to mention within their 1997 manifesto.

www.telegraph.co.uk/news/uknews/1531448/Browns-raid-on-pensions-costs-Britain-100-billion.html

www.dailymail.co.uk/news/article-1082511/Browns-17-000-tax-raid-EVERY-private-pension--value-cushy-public-sector-schemes-soars-1trillion.html

[meditrina]

The triple lock on the state pension is unconnected to the amount of tax a pensioner would pay on their total income, or how changes to NI have the potential to increase it substantially.

I agree that current pensioners would be unaffected.

And of course current intention of current government isn't binding on any future administration. There are plenty of examples of "bait and switch" in recent policy making. And the Coalition's administrative standards are pretty poor (I'm not a fan of the term 'omnishambles' but I'll drop it in as it's useful shorthand for what I mean).

[Isitmebut]

I say there is more cases recent cases of 'joined up policy thinking' e.g restrict immigration, improve education, make it pay more to work than claim, encourage private sector investment/job growth and reduce taxes for the lower paid.

But you are right, who knows what some fool of a government will do in the future.

As for dodgy administration, don't get me started on £14 billion NHS computer that took several years that didn't work, lost tax discs and others, no computerized immigration/asylum seeker records so on paper in boxes, and the increase expense of a quangocracy several times larger than they came in etc etc etc.

[HollyHB]

I agree that current pensioners would be unaffected.

Agreed, and that is the point.

Under the rules today voluntary NI contributions (class 2 or class 3 towards old age pension) are allowed to be paid up to six years in arrears. Which can be handy to not-formally-employed people whose circumstances have recently and drastically changed. If there are no more NI contributions then (I'm guessing but it seems reasonable) there will be no more opportunity to pay NI contributions six years in arrears. Stay at home mums will not be the only group affected, seasonal residents will also for example (not me, I'm already retired).

Note I'm only referring to voluntary contributions. Which is why I'll pass on brusque questions that relate to other issues.