Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment she has made of the potential merits of aligning National Insurance Contributions (NICs) earnings periods with those of income tax.

This would be a significant change, as National Insurance contributions (NICs) and Income Tax work quite differently at present.

NICs are charged on earnings on a per-employment, per-pay period basis, whereas Income Tax is an annual tax, and takes into account an individual’s total, cumulative earnings over the year. NICs also come with specific benefits e.g. State Pension, Jobseeker’s Allowance (JSA), Maternity Allowance, and Bereavement benefits. This is in line with NICs’ role as a social security contribution, into which contributions are made from people’s earnings while in work to support them when they are out of work. NICs are currently not payable by those over State Pension age. As such, amalgamating NICs into, or even bringing them closer into line with, income tax would come with major transitional costs and considerations

The Office of Tax Simplification (OTS) considered this in 2016 in its report on 'Closer alignment of Income Tax and National Insurance', which sets out their analysis on the range of challenges that would need to be taken into consideration before proceeding with such a radical reform as well as indications of potential winners and losers from closer alignment.