For years, there has been a big debate over whether National Insurance is merely income tax under another name.
A lot of people wrongly assume NICs pay for their state pension, not realising in fact it is just another payroll tax.
The big news in this spring statement was that Rishi Sunak appears to agree that there is little difference between NI and income tax.
By raising the threshold at which NI becomes payable to £3,000, bringing it to £12,570, the chancellor has brought NI into line with income tax. It can be seen as a step towards eventually merging income tax and NI into one levy and will be seen as a very welcome tax simplification.
Make no mistake, this was a huge giveaway from the chancellor, costing £6bn. It hands back almost half of the £12bn Mr Sunak is seizing in his forthcoming increases in employers’ and employees’ NI contributions.
Paul Johnson, director of the Institute for Fiscal Studies, pointed out that this will compensate seven in 10 workers for the forthcoming increases in NICs.
It helped – along with his promised tax cut for 2024 – underline Mr Sunak’s point that his priority, should extra money become available in coming years, will be to cut taxes rather than raise spending.
Leaving aside one-off hits like the global financial crisis, the pandemic and now the war in Ukraine, the big challenge to the UK economy has been its dismal productivity record and poor skills base.
Part of that reflects weak levels of business investment which, as the Treasury pointed out today, was worth just 10% of UK GDP in 2019 – the last year before the pandemic – compared with 14% on average across the OECD.
Numerous chancellors have sought to address this and Mr Sunak tried to do so today with a raft of measures aimed at encouraging business investment, including a reform of tax credits for research and development (R&D) and, of particular interest to smaller businesses, an increase in the employment allowance to £5,000 -…
Source : skynews
