Taxation - Economics of National Insurance

In this short video we look at an important direct tax - National Insurance. First introduced in 1911, national insurance is a tax on earnings and is paid by both employees, employers and the self-employed. It is one of the three biggest sources of tax revenue for the UK government bringing in nearly £160 billion a year.

Why is National Insurance an important tax to study?

NICs are one of the top three sources of tax revenue for the UK government bringing in more than £150 billion a year.

Changes in national insurance rates and allowances have a direct impact on people’s disposable incomes and spending power.

NI paid by employers affects the costs of employing extra workers – some regard it as a tax on employment which can hold back businesses looking to hire more workers.

Money raised by NIC is aimed at funding the NHS and state welfare – but it goes into the general pot of taxation.

Some argue that NIC should be raised to provide extra funds for the NHS and social care – the burden of health and social care spending continues to rise year on year.