Originally posted by Wanderer
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The main difference is the national insurance. This is charged on income from employment and is not charged on investment income (interest, dividends etc.). The reason for this is that national insurance is supposed to pay for unemployment benefit, pensions etc and these are mainly employment related, so the national insurance was applied on income from employment. Nowadays it is just really another tax. It could be charged on investment income but that would probably make the government very unpopular with lots of people who have finished work and who rely on investment income to live.
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