The Government has set out plans to better integrate income tax and national insurance contributions, although they have stopped short of a full merger of the two taxes.
This follows recommendations made by the Office of Tax Simplification, making the case for merging income tax and national insurance.
After calling for evidence on the proposals in the summer, the Treasury has now issued a formal response in which they say there is a “clear appetite for reform”.
Most of the evidence provided to the Treasury favoured making national insurance look more like income tax.
Rather than a complete merger of the two systems, the Treasury favours a reform that looks like “alignment, simplification or operational integration”.
We suspect that what this will eventually mean is two lots of income tax for those of working age to pay. This will revert to a single level of income tax when you reach retirement.
There was also confirmation that the Government has no plans to apply national insurance to dividends, which will please company directors.
We look forward to seeing more detail on this integration, probably in the Budget next year rather than the Autumn Statement later this month.
Photo credit: Flickr/wFourier
