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UK200Group: Merging NI and tax “fraught with difficulty”

MERGING national insurance and income tax is a “worthy objective” but one that government is unlikely to be willing to tackle, leading accountancy trade body members have said.

Commenting on the suggestion that merging NI with income tax would create a simplified system, reduce costs, increase transparency and incentivise the hiring of new staff, members of the UK200Group argued that such a move would be “fraught with difficulty”.

Writing in the Evening Standard, Amol Rajan, editor of the Independent, had said that merging the two contributions together would help the poorest in society. Though such an action appears logical, “but logic doesn’t always apply in the world of tax and often for good practical reasons,” said Cormac Marum, former inspector of tax, and head of tax advisory at UK200Group member firm Harwood Hutton.

For instance, income tax is paid on all income whereas national insurance is paid only on employment income, while NI is not paid by those beyond retirement age but they continue to pay income tax regardless of their age.

“Such a move would be extremely brave for any politician to make. Greater alignment in the rules is likely but it will, most likely, stop short of formal merger,” said Marum.

David Ingall, past president of UK200Group said: “Such a merger could seriously affect the retired as they of course currently do not pay NI. We should concentrate tax reduction efforts on the middle ground as these working families are rapidly seeing the benefits of working disappearing.”

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