Posted on 20 December 2016
A proposed change of the national insurance system could see millions of workers benefitting from paying less National Insurance Contributions (NICS) than before.
The Office of Tax Simplification (OTS) has called for the “outdated National Insurance system” to be reformed to make it “fit for the future”, proposing a change that would see national insurance being calculated annually to be more closely aligned with income tax.
Who would this affect?
The OTS estimated that approximately 5.5 million workers will pay higher national insurance contributions, while 7.6 million paying would pay less. The lower income bracket looks the most likely group to gain. Those who are awarded a pay rise part way through the year or receive an annual bonus and multiple jobbers could also face a higher bill.
Whilst there will be winners and losers in any system, a simplified system will mean one that will be able to cope with the current market, recognising that more and more people are combining employment and self-employment, and where the patterns of employment are continually changing.
What does this mean for me as an employer?
It is anticipated that the proposed reform will align the National Insurance Contribution system to the income tax system. As an employer this should mean a system that is easier to administer, more transparent and one that will enable a greater understanding of the calculations for National Insurance.
With the proposed raise in the Income tax threshold, the increased National Living Wage and the levelling of the employer and employee National Insurance thresholds, come April it looks likely the lower income bracket is set to gain. From a payroll perspective, it could be a busy time! The simplification of the whole system would certainly make life a lot easier!
If you want to discuss your payroll systems and have any queries following the recent Autumn Statement then please contact our Payroll team here.