Press Release: Help low-income workers by aligning income tax and NIC thresholds
Today the Government has published a policy paper on aligning the point at which employer and employee National Insurance Contributions (NICs) start to be paid. The LITRG highlights that more could be done to help low-income employees by pursuing a different alignment – that of the primary (employee) threshold for NICs with the point at which income tax starts to be paid, the personal allowance.
Anthony Thomas, Chairman of LITRG said:
“From 6 April 2017, employees will start to pay NICs on earnings over £157 a week. Annualised, this amounts to £8,164 – a difference of £3,336 when compared to the personal allowance for income tax which will be £11,500.
“The system as a whole would be substantially more coherent if the NIC Primary Threshold and personal allowance were aligned, or at least if moves were made towards doing so.
“Such a move would help many more people, mainly women, who work part-time in schools, supermarkets, catering and so forth to support the family income while raising the children and who receive no benefit from increases in the personal allowance; but they may be subject to Class 1 Primary NIC. As many such women might otherwise be entitled to National Insurance Credits if they did not work, payment of NICs is effectively an additional tax charge.
“For all those reasons, aligning the NIC and income tax thresholds would do much more to help workers on the lowest earnings than further increases to the personal allowance alone.”
As LITRG has often pointed out, changes to the personal allowance alone do not necessarily help those on the lowest incomes – particularly those who do not earn enough to start paying tax, and those who are in receipt of means-tested benefits calculated on the basis of net-of-tax income. LITRG’s latest comments on this subject can be found in its press release following the Autumn Statement.