Reeves urged to take 2p off employee NI and add it to income tax in budget

"In a report that will be closely scrutinised in the Treasury, it said an additional 6bn a year could be raised through a policy to cut employee national insurance by 2p, with a corresponding increase for all income tax bands. This is because income tax applies to a wider group of taxpayers than employee national insurance including pensioners, landlords and self-employed people."

"While the Resolution Foundation said the 2p switch plan would help to iron out unfairness in the tax system by spreading the tax take across a wider group in society, the policy could put Reeves in danger of breaking Labour's manifesto promise not to raise income tax. However, such a policy would leave employee tax rates unchanged, protecting the pay packets of working-age employees."

The Resolution Foundation proposes cutting employee national insurance by 2p and raising all income tax bands to raise up to £30bn while preserving employees' take-home pay. The proposed 2p switch could raise about £6bn a year because income tax applies to pensioners, landlords and the self-employed as well as employees. Scotland and Wales hold devolved income tax powers but are expected to follow the same approach. The change would spread the tax burden more widely and build on earlier national insurance cuts, but could conflict with Labour’s manifesto pledge not to raise income tax ahead of the 26 November budget.

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