Call now on 0161 976 5996 0161 976 5996

We even invest our own money to ensure our business clients get full access to one of the world’s leading marketing and business growth systems

Close alignment of income tax and NICS

Newsletter Issue - April 2016

The Office of Tax Simplification (OTS) has published its recommendations on closer alignment of income tax and national insurance contributions. The report contains some bold recommendations for what would be a major reform of the UK's tax rules.

At summer Budget 2015, the government asked the OTS to look at options for aligning Income Tax (IT) and National Insurance Contributions (NICs). This followed on from recommendations made by the OTS as far back at 2011, and the latest report builds on earlier work of the OTS including the reviews of small business taxation and employee expenses and benefits.

Key recommendations made in the report include:

If enacted, these measures would significantly change the calculation and collection of NICs, bringing NICs more in line with IT and simplifying the UK's tax system as a result. But this would mean major upheaval and create winners and losers – the OTS estimates that moving to an annual, cumulative and aggregated assessment period for employees' NICs would mean 7.1 million workers paying less NICs (an average of £175pa) and 6.3 million workers paying more (an average of £275pa).

The OTS acknowledges that it will take time to achieve what would be a major reform of the UK's tax rules, and that a significant amount of additional work will be required to fully understand all of the implications of the proposed changes. The government will now consider the recommendations made by the OTS and we can expect a further update shortly.