Campaigners call on Chancellor to merge Income Tax and National Insurance

The move would reduce the complexity of the tax system

Updated: 

Chancellor Philip Hammond is facing calls to use this month's autumn statement to merge Income Tax and National Insurance into a single tax on earnings.

The TaxPayers' Alliance (TPA) said the move would reduce complexity in the tax system and enable workers to get a clear understanding of how much they are paying.

For a worker on 20% basic rate income tax, the actual amount taken by the state is an average of 40.2% when employee's and employer's National Insurance (NI) contributions are taken into account, the TPA calculated.

The pressure group set out a five-year process which Mr Hammond could announce in his November 23 statement to merge the three levies into a Single Income Tax by 2021. And it also called for the basic rate to be set at 30%, effectively delivering a massive reduction in the overall bill paid.

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.

"There's an artificial shroud of complexity surrounding National Insurance rules which place an unnecessary bureaucratic burden on employers as well as the taxman and it is high time it was abolished.

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

Under the TPA's proposals, Mr Hammond would begin by introducing more transparent and "honest" names for NI contributions by the employee - "earnings tax" - and employer - "wages tax".

The group then calls for him to 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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