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New changes to the National Insurance system could leave millions of Brits worse off - including those on low-paid employment, according to a shocking government report.

The move, proposed by the Office of Tax Simplification (OTS), would see HM Revenue & Customs calculating national insurance annually rather than monthly – the same way it does income tax – to make the rules simpler.

But, this could leave three million UK employees earning over £35,000 a year worse off, experts warned, with up to six million workers paying hundreds of pounds a year more in national insurance.

In the report, the OTS calls for the “outdated system to be reformed” - with National Insurance contributions and income tax brought closer together to create a simpler and fairer system for business and taxpayers.

However, this would mean middle income earners losing £242 a year. Experts have also warned that the changes would hit middle earners who received a pay rise or bonus.

An estimated 2.4 million workers who juggle more than one job could also be hit by the reform.

Currently, workers who are paid less than £8,060 for each job do not have to pay NICs – but under the changes if their combined earnings are more than that amount they would have to pay it.

The proposals would also see around 5.5million pay higher national insurance contributions, or NICs, but 7.6million pay less, the OTS estimated.

Graduates and those in education who worked for just part of the year could end up better off to the tune of £169 each on average.

But around 2.7million middle-class workers who receive an annual bonus or are awarded a pay rise part way through the year would end up facing a much higher bill.

Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants, said: "Middle-class workers are really going to be affected by these changes. The Government really needs to be looking at the impact on them and must make sure they don’t lose out."

But OTS tax director John Whiting said: “The potential gains in easier administration, proper transparency and greater understanding are clear. But the impact of change will be considerable – millions of people would pay more in NICs, but millions would also pay less."

Hannah Maundrell, Editor in Chief Money.co.uk says: “Taking such a sizeable chunk of earnings for the sake of simplifying calculations is a dangerous move at a time when prices are starting to rise and household incomes are beginning to be squeezed.

"The system is overcomplicated and does need sorting but it’s important people don’t lose out.

“If the government do take heed and alter the way NI is calculated I’d hope they’d offset the loss with a tax cut somewhere else," she adds.

The shake up could be brought into force in about six years, although the Government must first give its approval.