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Posted by Nick Day on 15 Jul 2011

Tax and National Insurance Integration

UK Government issues a call for evidence regarding the possible integration of the tax and National Insurance systems.

Executive Summary

The Government has several times in the past few years talked about the potential harmonisation of the income tax and National Insurance systems.

It is now revisiting the issue and prior to a more detailed consultation to follow in the Autumn, the Government is seeking feedback and comments on a number of questions regarding the current process under which tax and National Insurance operate separately.

The Government believes that the integration of the two systems could:

  • Reduce burdens on employers by making compliance simpler and cheaper.
  • Remove distortions in the economy and improve transparency for individuals.
  • Be fairer – for example, by making it more likely that individuals with similar circumstances pay similar amounts and gain similar contributory entitlements.
  • Cut administration costs for Government and reduce complexity/costs for employers and Government.

The Government says it recognises that income tax and National Insurance were introduced for different reasons, and it will seek to preserve the contributory principle behind the National Insurance system, whereby contributions provide entitlements to certain benefits and a state retirement pension.

Evidence Sought

There are 14 questions the Government is seeking a response on to help them gather feedback/evidence.

The questions are divided in to two sections – those relating to “general interest” and those relating to “employers and payroll professionals.”

The deadline for responses is 19 September 2011. Please click the following links to access the Government’s statement and list of questions:

  1. Condoc Income Tax and National Insurance Contributions.
  2. Condoc Income Tax and National Insurance Contributions Cover Sheet.

Tax Innovations Review on Tax and National Insurance Integration

This review is to be welcomed as there are too many anomalies in the current processes that do not make sense and cause confusion for employees and employers alike, and lead to additional costs for employers.  The preservation of the contributory principle to National Insurance is we believe a good thing, as is the announcement that the Government will not extend the collection of National Insurance contributions to individuals who have reached state pension age or to pensions, savings and dividends.

Contact Tax Innovations

If you would like any more information or advice regarding the above points or would simply like to discuss other ways in which we could help you and your company, please do not hesitate to contact us on 01962 856 990 or by emailing customerserivce@taxinnovations.com.


See also…

National Insurance for the Self Employed taking a U-turn

HMRC: Staggered Start to the Introduction of Real Time Information Penalties

Modernising the Personal Tax System

What is the Employer National Insurance Holiday?

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