This week's opinion: 29 July 2021

What are we to make of reports that National Insurance rates may increase? At the time of writing nothing has been announced but there is no doubt that increases are being actively considered. 

The debate over whether this is the right way to fund social care has highlighted three key differences between National Insurance and income tax. These are: increases in National Insurance have a disproportionate effect on lower earners because of the upper earnings limit; the difference in National Insurance rules for employees versus the self-employed; and the exemption from National Insurance for post-retirement income.   

The first is insoluble unless there is a merger of income tax and National Insurance, and this seems unlikely. The second is in the chancellor’s sights and I assume that eventually we will get some proposals. The third interests me, not least because I am counting down the months before the government gives me a significant pay rise solely because of my age. Can that be justified? 

The National Insurance exemption for retirees dates back to an era of compulsory retirement ages and lower life expectancy. I was shocked to be reminded that, at the time of the 1942 Beveridge Report, the average life expectancy of a man after retirement was one year (tinyurl.com/uzhuc2jw). 

There are strong arguments on both sides of this issue and, in Yes Minister terms, it would be a brave chancellor who abolished the exemption. But we do need a grown up debate about this. 

If you do one thing...

Read paragraphs 28 to 30 of the North Point First-tier Tribunal decision (tinyurl.com/tc8205) for an illuminating discussion of what a company director without specialist tax knowledge must do to demonstrate reasonable care.