UK Tories Pledge To Reverse NIC Hike

by Jason Gorringe, Tax-News.com, London

30 March 2010

The UK’s Conservative Party, as part of their election campaign, have pledged to reverse, in part, the Labour Government’s plans to increase national insurance contributions by 1% in April 2011.

Shadow Chancellor George Osborne announced that the tax cut would be funded by a GBP6bn reduction in public spending in the next financial year, with the Departments of Health and International Development in the firing line. This is in addition to GBP6bn of cuts in public spending proposed for 2010-11 to reduce the deficit.

The national insurance cut would apply to individuals earning under GBP35,000 per year; for those with incomes above that threshold, the current planned 1% rise will continue to apply. However, weekly thresholds will be increased to offset the impact of the tax rise.

For those earning up to GBP35,000 per year, the weekly threshold above which national insurance contributions must be paid would rise by GBP24; the upper earnings threshold would increase by GBP29 per week.

According to Osborne: “Every national-insurance payer earning between GBP7,100 and GBP45,400 will be up to GBP150 better off.” He added that the threshold at which employers pay contributions on their employees’ earnings will also be raised, by GBP21 per week. He claimed that under the Tory proposals, 70% of the UK’s workforce would benefit.

Ed Milliband, Energy and Climate Change Secretary, declared the Tory proposal as “a tax cut on the never never,” and pointed out that the Tories have for the past few months been promoting “their overriding priority [to] cut the deficit.” The proposal has, however, received the backing of the Institute of Directors.

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