Quote:
Originally Posted by heero_yuy
Best way here IMHO would be to roll NI into income tax. This would have several benefits: The starting threshold for NI clobbers the very low paid, making this the same as income tax would help them. Those who contract their work and avoid paying NI could be bought into the system particularly if the amount they can pay themselves by dividends is limited.
Then there's no upper ceiling to income tax unlike NI (£150K IIRC) so some extra revenue could be generated from those on higher pay to put toward the NHS.
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Scrapping NI has been discussed for as many years as I have been working in the payroll industry (I teach it)
You need to take into account Employers NI and the other classes of NI where people are paying extra to cover gaps in their employment and self employed people.
All employees get an NI allowance.. An employee on NI Table letter A would be: (There are others for under 21s and Apprentices under 25 but these help the employer not the employee)
Primary Threshold: £155 per week £672 per month £8,060 per year (This is where the employees start paying NI at 12% on everything above this)
Secondary Threshold: £156 per week £676 per month £8,112 per year
(This is where the Employers start paying NI at 13.8% above this)
One people get to the UEL they pay 2 % on all earnings above that... this is because they have contributed enough for a full state pension. It used to be 0%, then 1%
If we compare the NI threshold to the personal allowance of 1100L employees can earn appox £916 a month before paying tax at 20% (rising to 1150L / £958.33 in 17/19) This means people pay NI before they start paying tax but at a lower rate.
There is one big discrepancy with NI which I think should be removed.. If you have more than one job you get the same allowance in both jobs (unlike tax where you can split the personal allowance or go onto a BR / 0T) unless you earn up to the UEL in one job.. you can get a certificate of deferment and just pay 2% in the 2nd job.
One more thing.. the LEL (lower earnings limit) is used to determine if an employee is entitled to statutory payments like SMP or SSP. NI is also used in the calculation of the Employment Allowance and the Apprenticeship Levy (Which starts in 2017/18).
National Insurance is more complicated than Tax (in my opinion) .. but has been simplified in recent years.