as the 'earnings tax': would it really clear up how much we actually pay in direct taxation?

A backbench bill proposing to change the name of National Insurance to 'Earnings Tax' will be discussed in parliament today. The addition of NI on top of income tax means those on the basic rate actually pay a tax rate of 32 per cent rather than the 20 per cent that is normally quoted. Here's what you need to know.


National Insurance is just tax anyway, right?

It certainly feels like it to most people. For employees, Income tax and National Insurance are both collected before you get paid. Once you start earning £149 a week you pay 12 per cent of your income as National Insurance. You pay that rate on all earnings up to £797, and then you pay 2 per cent NI on anything you earn above this. Put very simply, paying NI means that basic rate taxpayers see roughly a third of their earnings swallowed by the Government.
Higher rate taxpayers see a 42 per cent chunk eaten. In reality, the numbers don't quite match up to the examples above for everyone, as on a 52-week year 12 per cent NI would start at £7,748, whereas the personal allowance before basic rate tax kicks in is £9,440.
Higher rate tax at 40 per cent kicks in at £41,451 and 2 per cent NI at £41,444.


Your employer must also pay National Insurance on your behalf - worth 13.8 per cent on your earnings above £148 a week. The sums collected by the Exchequer from NI are huge. In 2012/13 the Government collected £102billion in NI contributions - more than any other tax apart from Income Tax, which delivers £152billion, and ahead of VAT at £100billion.....Read more here