Practical differences between National Insurance and tax

In the month where primary National Insurance contributions (NICs) are being reduced from 12% to 10% but income tax remains the same it would seem appropriate to revisit the practical differences between National Insurance and tax.

Many years ago I collaborated with specialists who had trained with the Contributions Agency before it was merged into the Inland Revenue (as it then was). They would always stress how different the NIC system was from income tax. Even today a quarter of a century after the disappearance of the Contributions Agency tax and National Insurance remain substantially different. This article reminds practitioners of some of the important differences.

The first difference is that contributions into the National Insurance system provide potential benefits. Most notable of these is the state pension where one needs 35 years of contributions or credits to obtain a full state pension and a minimum...