Help low-income workers by aligning tax and NIC thresholds

Anthony Thomas, chairman of LITRG, reacts to the governments new policy alignment to National Insurance contributions.

The government has published a policy paper on aligning the point at which employer and employee National Insurance Contributions (NIC) start to be paid.

It has led the Low Incomes Tax Reform Group (LITRG) to highlight 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, says, ‘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.

Thomas says, ‘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.’

He concludes, ‘As many such women might otherwise be entitled to National Insurance Credits2 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.’

Further reading on tax breaks

Owen Gough, SmallBusiness UK

Freddie Halvorson

Owen was a reporter for Bonhill Group plc writing across the and titles before moving on to be a Digital Technology reporter for the

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National Insurance