Pre-Budget Report: BDO comments on National Insurance

Stephen Herring, Tax Partner, BDO, commented:

“It is not surprising that the Chancellor has looked to national insurance to meet part of his long term fiscal shortfall from 2011/12; this is always considered to be more politically acceptable than a rise in the basic rate of income tax although it has a somewhat similar effect. Whilst the half per cent increase in employers, employees and self-employed national insurance contributions may seem to have a similar affect, this is not really the case. National insurance contributions paid by employers represent a payroll tax and, at the margin, will influence the level of employment. The increase of half a per cent to be suffered by the self-employed represents a fifty per cent increase in the existing one per cent rate in excess of the upper earnings limit. This will be seen by both the self-employed and employees on earnings of over £40,000 as a significant additional tax burden from 2011/12.”

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