National Insurance, a 100 year old charge on employers and employees looks set to be renamed “Earnings Tax” as new legislation is introduced to parliament. The plans are said to have backing from the chancellor George Osborne.

The change, which will be proposed in legislation to be published on Tuesday 25th February, is the first step towards merging Income Tax with National Insurance.

Ben Gummer, the MP who will propose the change, told the Telegraph: “This would be a really good step forward in making what the Government takes from taxpayers clearer and simpler."

Mr Gummer said he hoped the name change would begin the process of merging National Insurance with Income Tax into one single charge.

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“The most important part is changing the name so in the public mind we can begin the two as the same, which they are.”

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About National Insurance

National Insurance, which is charged on top of income tax, was first introduced in the National Insurance Act by Lloyd George in 1913 as a way for workers and employees to contribute towards certain benefits, such as a state pension.

Unlike income tax, MPs are not allowed to vote on whether it should be levied every year. Instead they are only asked to approve the level of the charge.

National Insurance rakes in billions every year for the Treasury. Anyone who is employed and earns between £149 and £797 a week pays 12 per cent of their income in National Insurance. A further 2 per cent is paid on all earnings over that level.

People who are self-employed pay National Insurance at a flat rate or as a percentage of the individual’s annual taxable profits.

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For more information on National Insurance, see the HM Revenue and Customs website