Income Tax & National Insurance Systems to be merged?

A senior tax manager at Grant Thornton UK, Ellie Gamble, said that “We cautiously welcome government plans to merge the operation of income tax and NICs. This could really make life easier for both employer and employee. We would, however, urge the government not to rush anything through. Moreover, the change should not lead to ‘scope creep’, resulting in additional tax charges under the smoke screen of simplification. For example, employees currently don’t pay national insurance on employer-provided benefits, even though they are taxable. If this is to be changed, it must be done in the clear light of day. The government seems to have made up its mind about the principle of merging two duties which have for a long time been perceived as one thing, the government’s share of earnings. The consultation is just about the detail of such a merger. We would urge a measured approach to ensure that we don’t throw

However Ian Dewar, a small business tax convenor at the ICAS said that “The bringing together of NICs with income tax and the removal of the difference in rates between self employed and employed would not only introduce a huge simplification but also lessen concerns of tax loss due to employment status. Politically, the merger of income tax and NICs would require bravery as it would finally make people aware of their real marginal rates of tax. However, it would bring substantial benefits by simplifying the tax regime.”

Although the integration of the two taxes would in many ways be seen as a positive step forward the Government would need to sell the idea to the nation in order to avoid a backlash. An integration of the tax systems would see headline figures jump significantly, something which could lead to a great deal of misunderstanding.

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