Plans to rename Nation Insurance

The 100-year old National Insurance may be renamed “earnings tax”.

The Government is planning one of the biggest ever reforms of National Insurance in a bid to make the system more transparent for businesses and their employees. It is the first step towards merging income tax with National Insurance. In late February, Tory backbench MP Ben Gummer presented a Commons Bill that proposed a name change for National Insurance along with giving the salary deductions process more clarity. “This would be a really good step forward in making what the Government takes from taxpayers clearer and simpler,” he said. “The most important part is changing the name so in the public mind we can begin the two as the same, which is what they are. This is a first step.”

Mr Gummer suggested that National Insurance be renamed ‘Earnings Tax’. This proposal was welcomed by the Chancellor, George Osborne, who will influence whether or not it is pushed through. Unlike income tax, MPs are not allowed to vote on whether national insurance should be levied every year. They are rather asked to approve the level of the charge. He added that the Coalition had been “very receptive” in trying to make the tax system more transparent. 

National Insurance creates billions in revenue every year for the Treasury – anyone who is employed and earns between £149 and £797 a week pays 12% of their income in NICs. A further 2% is paid on all earnings over that threshold. 

It’s early days so watch this space… 

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