Pension tax raid being touted again

Paul_Herring

It is clearly just  apart og general taxation.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/839411/Great_Britain_National_Insurance_Fund_Account_-_2018_to_2019.pdf

The National Insurance Fund (NIF) holds National Insurance Contributions (NICs), paid by employees, employers and the self-employed. Voluntary contributions are also paid into the fund. Receipts paid into the NIF are kept separate from all other revenue raised by national taxes and are used to pay social security benefits such as contributory benefits and the State Pension.

zagfles

Paul_Herring said:

It is clearly just  apart og general taxation.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/839411/Great_Britain_National_Insurance_Fund_Account_-_2018_to_2019.pdf

The National Insurance Fund (NIF) holds National Insurance Contributions (NICs), paid by employees, employers and the self-employed. Voluntary contributions are also paid into the fund. Receipts paid into the NIF are kept separate from all other revenue raised by national taxes and are used to pay social security benefits such as contributory benefits and the State Pension.

Which also says:

"NHS allocation
The NHS allocation is paid over by HMRC to the NHS before any contributions are paid into the NIF and so the figures shown are net of this NHS allocation. The NHS allocation was £25.4 billion in 2018-19 (£24.3 billion in 2017-18) and forms part of the total NHS funding. The NHS allocation is based on the Government Actuary’s estimates for the year ended 31 March 2019 made in December 2018. The allocation is estimated in accordance with the requirements set out in Section 162 of the Social Security Administration Act 1992"

The NHS is mostly funded from general taxation, but an amount is nicked from the NI fund, probably whatever amount isn't needed to pay NI benefits. So basically, it's general taxation since the govt can choose to take from the fund to help pay for something (the NHS) which is not a contributory benefit.

The_Green_Hornet

The only reason money is taken from the NIF for the NHS is because New Labour wanted to keep a 2001 general election manifesto pledge not to raise income tax so they added 1% onto NI instead.

redpete

Gary1984 said:

Even if you banned the thing called salary sacrifice what's to stop companies offering higher employer pension contributions in lieu of wages, thus achieving the same thing?

Maybe their desire to hang on to cash when their business has been challenged by the consequences of COVID.

bigadaj

The_Green_Hornet said:

The only reason money is taken from the NIF for the NHS is because New Labour wanted to keep a 2001 general election manifesto pledge not to raise income tax so they added 1% onto NI instead.

Don't think that's the only reason....

The_Green_Hornet

bigadaj said:

The_Green_Hornet said:

The only reason money is taken from the NIF for the NHS is because New Labour wanted to keep a 2001 general election manifesto pledge not to raise income tax so they added 1% onto NI instead.

Don't think that's the only reason....

What other reason is there?

nigelbb

jimi_man said:

nigelbb said:

Mickey666 said:

zagfles said:

Mickey666 said:

How about removing the cap on NI contributions?  When most other taxes seem to be progressive,  I’ve never quite understood why the NIC rate REDUCES for higher earners?  

Because the annualised threshold co-incides with higher rate tax, so combined with income tax it is generally progressive, from 32% to 42%. But there are some anomilies to do with income tax being assessed over the year and NI over the pay period...

It’s really just paying politics isn’t it?  There’s no real justification for not combining income tax and NI into a single income tax, but governments like to have a complicated tax system because it gives them something to fiddle around with come budget time.

National Insurance isn’t just another income tax though as it is that very rare example of an hypothecated tax (the TV licence fee is the only other one I can think of). NI contributions are paid into the NI fund which is used for paying pensions & a few other work related benefits line JSA). 

And the NHS. 

Only a small proportion of NHS funding comes from NI contributions. In 2019 it was about £25 billion. After the NHS allocation was paid over by HMRC the receipts from NI contributions were almost £109 billion in 2019 with over £100 billion paid out in pensions & other benefits. Total NHS funding in 2019 was around £125 billion with the missing £100 billion funded out of general taxation. Fully funding the NHS from NI would require contributions to be more than doubled.

Here is the annual report of the National Insurance Fund https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/839411/Great_Britain_National_Insurance_Fund_Account_-_2018_to_2019.pdf

zagfles

nigelbb said:

jimi_man said:

nigelbb said:

Mickey666 said:

zagfles said:

Mickey666 said:

How about removing the cap on NI contributions?  When most other taxes seem to be progressive,  I’ve never quite understood why the NIC rate REDUCES for higher earners?  

Because the annualised threshold co-incides with higher rate tax, so combined with income tax it is generally progressive, from 32% to 42%. But there are some anomilies to do with income tax being assessed over the year and NI over the pay period...

It’s really just paying politics isn’t it?  There’s no real justification for not combining income tax and NI into a single income tax, but governments like to have a complicated tax system because it gives them something to fiddle around with come budget time.

National Insurance isn’t just another income tax though as it is that very rare example of an hypothecated tax (the TV licence fee is the only other one I can think of). NI contributions are paid into the NI fund which is used for paying pensions & a few other work related benefits line JSA). 

And the NHS. 

Only a small proportion of NHS funding comes from NI contributions. In 2019 it was about £25 billion. After the NHS allocation was paid over by HMRC the receipts from NI contributions were almost £109 billion in 2019 with over £100 billion paid out in pensions & other benefits. Total NHS funding in 2019 was around £125 billion with the missing £100 billion funded out of general taxation. Fully funding the NHS from NI would require contributions to be more than doubled.

Here is the annual report of the National Insurance Fund https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/839411/Great_Britain_National_Insurance_Fund_Account_-_2018_to_2019.pdf

So it's not "hypothecated" then. Some of it is nicked to supplement general taxation (ie help fund the NHS which is mainly paid for from general taxation).

jamjar92

Not a surprise really the government robbing Peter to pay Paul, when did road tax just be used to maintain the roads?

bigadaj

The_Green_Hornet said:

bigadaj said:

The_Green_Hornet said:

The only reason money is taken from the NIF for the NHS is because New Labour wanted to keep a 2001 general election manifesto pledge not to raise income tax so they added 1% onto NI instead.

Don't think that's the only reason....

What other reason is there?

Several dozen. You are quoting a policy from twenty years ago since when there have been five elections and several different governments, we do currently have another party in power. As others have said the NIF being separate has been a fiction ever since it was set up decades ago, money flows in and out of it dependent on need and circumstance. Spending on many areas of welfare has increased rapidly, the NHS being one despite constant complaints of cuts, pension costs continue to rise etc etc