Progress on Plans to Merge Tax and National Insurance

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June 25th 2022
Tax Week 12
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Progress on Plans to Merge Tax and National Insurance

In order to produce a report for Budget 2016, the OTS is taking on extra staff to research specific areas

The Government has had the eventual goal of removing the existing seperate National Insurance deduction for a number of years now. The process has been long and arduous due the number of taxpayers and other stakeholders it would directly impact. In a continuation of the tasks leading to the alignment of both deductions into just the single income tax, the OTS are adding additional staff to conduct specific research.

The Office of Tax Simplification has been tasked with producing the report covering the entire switchover, from reasons for doing so through to the actual process.

Specifically, the following is a list of areas that will be explored:

  • Examination of the current Tax and NIC system, from rates/bands to administrative costs and legislation.
  • Changes required to merge NIC into just the single tax deduction.
  • Impacts upon all stakeholders, including businesses.
  • Compliance issues, avoidance risks, operational impacts and educating stakeholders.

Within the briefing document published by the OTS, they have identified a number of hurdles that make the process complicated - but need to be overcome. These include the differences to the starting points at which the tax and NIC's kick in, the current difference between Self-Employed and Employed NI rates, and the calculation difference (annual vs earnings basis).

The OTS will be reporting to the Chancellor prior to Budget 2016 on not only this issue but also on their research into the simplification of small business taxation.

Small business is being targeted to identify areas where day-to-day complexity can be removed and a greater level of understanding of responsibilities can be provided for owners. Specifically, the differences between sole traders and partnerships, administrative burdens, and the difference between personal and business taxes.

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