Main Page | See live article | Alphabetical index

National insurance

National insurance is the system of payroll taxes, and related social security benefits, that has operated in the United Kingdom since its introduction by the government of Clement Attlee in the late 1940s.

The name national insurance was adopted as an expression of that government's aspiration that the system should be qualitatively different from conventional general taxation such as income tax or consumption taxes.

The proposed differences that were enacted, or aspired to, included:

Initially, the most important contributory benefits were the state retirement pension and unemployment benefit.

With the introduction of employer payroll tax deduction (Pay-As-You-Earn or PAYE), employees' national insurance contributions were collected along with income tax. This replaced the old system of purchasing a contribution certificate or stamp, but for many years some older Britons continued to describe making NI contributions as paying their stamp.

In the contemporary United Kingdom budget national insurance contributions are a significant source of government revenue comparable with value-added tax (a consumption tax levied on most goods and services at a standard rate of 17.5%).

See also