For decades, lancing the ugly boil of National Insurance from the none-too-pretty face of the British tax system has been on the wishlist of tax reform campaigners and payroll professionals. The complicated system of weekly ‘contributions’ has long since twisted out of its original insurance shape into the current reality of being just another tax on income. Different rules on things such as when it’s applied, who is liable, what is ‘employment’ and what’s allowable as an expense make for a nightmarishly fiddly system that’s a major headache for employers and anyone trying to work out how much they have to pay.
Employer’s National Insurance, the so-called ‘jobs tax’, is particularly unpleasant due to its nature of ultimately being paid for by workers in the form of depressed wage levels while procedurally being a charge landed on employers. That disconnect between the employer who writes the cheque to HMRC and the employee who ends up being worse off because the economic burden is passed on to him via lower wages means it’s particularly lacking in the transparency and simplicity that taxpayers have a right to demand from the system that confiscates their money.
But which Chancellor wants to be the one to whip out the scalpel and do the deed? Many groups would potentially face a nasty tax hike from a poorly thought-through plan to merge National Insurance with Income Tax. Pensioners, the self-employed, people with two jobs or fluctuating incomes are among those who now benefit from advantages over regular employees in standard PAYE employment, who have to pay more. The status quo is certainly unfair on regular employees, but those who do nicely out of it have every right to object to being lumbered with any more tax.