News | Legal News

03 November 2016

Campaigners call on Chancellor to merge income tax and national insurance

Philip Hammond has been urged to announce a merge of Income Tax and National Insurance into a single tax on earnings in this month's autumn statement.

The move will reduce complexity in the tax system and enable workers to gain a clearer understanding of how much they are paying, according to the TaxPayers' Alliance (TPA).

According to TPA calculations, workers on the 20% basic rate income tax are actually paying an average of 40.2% when National Insurance (NI) contributions for both employee and employer are taken into account.

The pressure group is also calling for the single tax basic rate to be set at 30%, effectively delivering more than a 10% reduction in the overall levy on earnings.

The TPA has outlined a five-year process to merge the three levies into a Single Income Tax by 2021.

TPA chief executive John O'Connell said: "National Insurance is just another tax on earnings that hides the truth from taxpayers.

"Many are paying far more than they realise, blissfully unaware that their National Insurance contributions are not being set aside for their retirement, but frittered away like the revenues from any other tax."

The TPA is calling for the "artificial shroud of complexity" surrounding NI rules to be abolished, which will alleviate the "unnecessary bureaucratic burden" on employers and the taxman, the group suggests.

"We need a simple and transparent tax code which nurtures economic growth, not archaic rules which discourage job creation and fuel needless bureaucracy," added Mr O'Connell.

Under the TPA's proposals, Mr Hammond would cut the employee's and employer's NI contributions by gradual stages to 10% - from 12% and 13.8% respectively - by 2019 and then legislate to abolish both charges in 2021, when the new Single Income Tax would be introduced.

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