Quote:
Originally Posted by homealone
I've often wondered why should there be an 'upper earnings limit' on National Insurance Contributions?
- however I also believe what you pay in NIC should reduce your liability for Income Tax 
Otherwise it is all 'jam tomorrow' - dependent on whether they get re-elected??? |
Probably because, notionally, NI contributions are supposed to pay towards certain benefits (maternity benefit, widow's pensions) & the NHS. In order that HMG can claim it's not a tax the total possible contribution per person is capped.
Note that the link said the upper earnings limit is going to be raised by £75 a week in 2008 i.e. you'll pay contributions on more of your salary.
In 2009 the upper earnings limit & the higher rate tax threshold will be aligned i.e. you'll pay 11% of your salary from the lower earnings limit all the way up to where the 40% tax rate kicks in (at the moment the upper limit is lower than the higher rate threshold). After that you pay 1% NI on the rest of your earnings, effectively making the higher tax rate 41%...