Exclusive: National Insurance hiked by 135 per cent in 20 years, much faster than any other tax
The government announced a new Health and Social Care Levy earlier today, which will effectively hike National Insurance Contributions for employees and employers by 1.25 per cent from April 2022.
So how often are NICs used to pay for government investments and additional public spending? City PM studied the last twenty years.
Tax receipts from National Insurance have risen by 135 per cent, from £61bn to £143bn over the last 20 years, according to data by accountancy group UHY Hacker Young. This is far faster than in increase in overall tax and income tax, which have risen by 85% over the same period.
Since 2001:
- National Insurance receipts have risen by 135 per cent, from £61bn to £143bn.
- Total tax receipts have risen by 85 per cent, from £316bn to £585bn.
- Income tax receipts have risen 86 per cent, from £105bn to £196bn.
National Insurance Contributions last year contributed £142.7bn to the Treasury’s coffers. It now makes up 24 per cent of the total tax burden, compared to 19 per cent in 2001.
Overuse of NIC
There has been criticism of the overuse of increases in National Insurance Contributions (NIC) by successive Governments to increase overall tax receipts, as it is seen as less transparent for taxpayers than a rise in income tax.
The NIC paid by employers is also commonly referred to as a ‘tax on jobs’, as it increases the cost to businesses of employing labour.
It is argued that a high NIC paid by UK employers encourages employers to offshore more jobs and to substitute jobs for IT or other automated processes.
“Increases in National Insurance are typically burdens on employers, employees, the self-employed or all three groups. However, it is a tax that doesn’t hit those who are drawing their income from capital gains or income from property or other assets,” commented Phil Kinzett-Evans, partner at UHY Hacker Young, this afternoon.
“Inflation is hitting everyone, fuel prices are creeping back up to their highest ever, house-prices are literally through the roof. There will be a lot of dismay if tax changes unduly burden the low and middle income,” Kinzett-Evans told City PM
“Whilst raising money is necessary for Government to meet its obligations, tax policy ought to try to avoid punishing those whose incomes stretch the least far and who cannot afford to pay more,” he concluded.