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Earnings Tax replacing National Insurance

National Insurance, which has been levied on employees and their employers for a century, will be rebranded as “Earnings Tax” according to the Chancellor’s office. The change signals a future where income tax and National Insurance are combined which some believe will make paying taxes on our earnings more transparent.

Earnings Tax

The plans for Earnings Tax to replace National Insurance are being proposed by Ben Gummer MP, a rising star of the Conservative Party. According to The Daily Telegraph, Chancellor George Osborne is “attracted to the idea.” Mr Gummer’s proposal has been put forward as the government “have been very receptive to trying to make the tax system more transparent,” according to the Tory backbencher. “This would be a really good step forward in making what the Government takes from taxpayers clearer and simpler.”

Change of name

Mr Gummer said that the change of name is only the beginning and that it signals the impending merger of Income Tax and National Insurance. He called the name change, “most important part,” because it will help the public to understand the reform.

National Insurance Act 1913

More than 90 years have passed since the National Insurance Act was introduced by Lloyd George as a way for workers to contribute towards benefits like the state pension. Unlike Income Tax, MPs can’t vote on whether it should be levied by the Treasury. All workers contribute at least 12% of their salary to the Treasury through National Insurance. Others on higher wages paid an additional 2%.

Final word

Whether National Insurance is rebranded as Earnings Tax or not remains to be seen. Whether Income Tax and National Insurance are combined in the future is unknown at this time. Before the proposal can be dismissed or accepted it will be debated in parliament, pubs and living rooms up and down the country.

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