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Tuesday
Feb112014

National Insurance and income tax to be merged?

The Office of Tax Simplification (OTS) has revealed long-term plans to merge NICs and income tax into one unified tax. The measures were included in a recently published review of employee benefits.

In the review, the OTS recognised that such a merger would “undoubtedly be complex, raising significant issues going to the heart of the current system with many political implications”.

However, it maintains that despite the colossal task, it would be worth it for the “significant simplification rewards in the long term” and the increased transparency that it would offer to taxpayers.

The OTS also proposed that the P11D form, which is used to report non-payroll benefits on yearly basis, should be scrapped. 4.4m forms are processed per year, at a huge administrative cost, bringing in more than £3.3bn in tax and NICs.

Instead, the paper proposes that employers should be permitted to payroll some or all of the benefits and expenses on a monthly basis. This would save “vast amounts of time and effort for employers, agents and HM Revenue & Customs”.

Danny Cox, head of financial planning for Bristol-based Hargreaves Lansdown, said: “The UK tax system is rife with complexity and employers and taxpayers alike would welcome simplification. But full integration of income tax and NI is a mammoth task and would require rewiring the pension system too.

“We may see some government response on this project in the forthcoming Budget, which will probably adopt some of the quicker wins, although we are some way off unification of the two taxes.”

If you need someone to help you through the complexities of the UK tax system, St Matthew’s team of experts are here for you. Visit stmworldwide.com/services-solutions for a full range of our services.

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