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Taxation - Economics of National Insurance

GCSE, AS, A-Level, IB
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 29 Dec 2022

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.

Taxation - Economics of National Insurance

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.

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