National Insurance shake-up could leave millions worse off
Looks like there's going to be a shake-up with our National Insurance, and sadly, it means that millions of people could end up out of pocket. A report referred to the system we've got now as "no longer fit for purpose", and the new proposals could see those in low-paid jobs worse off.
So what changes are afoot? Well, proposals by the Office of Tax Simplification would see HMRC calculating NI payments in the same way they calculate Income Tax. It could see a merging of tax and NI into one earnings tax.
This was mentioned in George Osborne's 2011 Budget, and this latest report looks at how this might be achieved.
Basically, the current system allows people who have more than one low-paid job to avoid National Insurance if the wage they take from each is below £672 per month. The combined wages can exceed the threshold, which might not seem fair if you've got one job that pays less than someone else's two combined part-time jobs, but there we are.
This new proposal would see an end to that.
According to the HMRC, the new rules would see 6.3 million paying more National Insurance contributions, however, 7.1 million would end up paying less.
Thanks to their being two systems, it makes tax more difficult to calculate. The report says: "The differences between IT and NICs have often been cited as a major source of complexity in the UK’s tax system and, in this review, the OTS was asked to consider the impacts, costs and benefits and the steps necessary to achieve closer alignment."