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Will Osborne Merge Income Tax And National Insurance?


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http://citywire.co.uk/new-model-adviser/office-of-tax-simplification-calls-for-ni-and-income-tax-merger/a477725

The Office of Tax Simplification (OTS) has recommended merging income tax and national insurance (NI) in its interim report on small business tax.

Following representations from small businesses, the OTS report said the distinction between NI and income tax created ‘anomalies’ and complexity.

‘The issue of combining income tax and national insurance national insurance contributions (NICs) has been raised frequently in workshops, formal submissions and email contributions. There was an almost unanimous view from small businesses and advisers that legislative change in this area can deliver genuine simplification,' it said.

‘Maintaining two separate systems leads to a number of anomalies that provide incentives to distort behaviour. This leads to decisions being taken that are wholly tax driven, and in many cases are more complex and may not otherwise make commercial sense.’

The report’s key recommendations are:

* Integrating income tax and national insurance contributions, including the employment and self-employment boundary

* A ‘radical’ overhaul of the way the ‘very smallest’ unincorporated business are taxed

I think this change is long overdue. From an HPC perspective it will also see an increase in taxation on BTL income and in overall terms will shift the tax burden away from earned income.

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http://citywire.co.uk/new-model-adviser/office-of-tax-simplification-calls-for-ni-and-income-tax-merger/a477725

I think this change is long overdue. From an HPC perspective it will also see an increase in taxation on BTL income and in overall terms will shift the tax burden away from earned income.

I think you've answered your own question there

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I think this change is long overdue. From an HPC perspective it will also see an increase in taxation on BTL income and in overall terms will shift the tax burden away from earned income.

I don't think he'll be allowed to.

Sir Humphrey will conclusively and unanswerably demonstrate the catastrophic folly of doing any such thing.

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But if they merged income tax and NI, how would the government know which money to put in the big national insurance pot it has been steadily accumulating for the last 55 years?

It has been doing that, right?

Right?

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But if they merged income tax and NI, how would the government know which money to put in the big national insurance pot it has been steadily accumulating for the last 55 years?

It has been doing that, right?

Right?

if i remember rightly the UK Sov Wealth Fund generated through lifelong NI payments was underfunded by about 3% in 2000 so Brown bought loads of Gold so its now massively overfunded

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But if they merged income tax and NI, how would the government know which money to put in the big national insurance pot it has been steadily accumulating for the last 55 years?

It has been doing that, right?

Yes . . . You might as well merge Road Fund tax as well and all the other 'earmarked' stuff that only goes into one big Treasury tub.

Pensions and health insurance contributions should have been separated away from Government years ago into a scheme that would actually invest them into a fund for just that purpose.

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I can see the out cry from save our savers when they get taxed at 32% on the interest of their savings

Yep. I wonder how much revenue the government are losing because of the low IR environment? It'll be like diesel, because they can't sell as much (the cars do more mpg), they tax it more instead.

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I can see the out cry from save our savers when they get taxed at 32% on the interest of their savings

It'll bump up sales of ISAs...

Earned and unearned income should be taxed in the same way

Are there any figures oh how much NI costs to collect?

Andy

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Earned and unearned income should be taxed in the same way

They shouldn't. Unearned income should be taxed in preference to earned income. Though governments like to fudge and confuse this issue as much as they can. One means of doing this is by calling things 'unearned' and 'earned' randomly, rather than using simple reason.

Edited by Stars
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Earned and unearned income should be taxed in the same way

Before Income Tax the reasoning used to be that earned income was simply an exchange of your labour for the equivalent in cash and therefore no profit was being made

Unearned income, on the other hand, was accrued whilst the person receiving it sat on his or her rear end and was therefore all profit and eminently taxable

If you take factors like risk into account the real situation is a little more complicated. However, I'm not sure that additional complication justifies the steady shift of the burden of taxation from unearned to earned income which has been quietly eased in over the years

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They shouldn't. Unearned income should be taxed in preference to earned income. Though governments like to fudge and confuse this issue as much as they can. One means of doing this is by calling things 'unearned' and 'earned' randomly, rather than using simple reason.

What do you mean "by taxed in preference" - taxed more or taxed less?

Andy

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Unearned income, on the other hand, was accrued whilst the person receiving it sat on his or her rear end and was therefore all profit and eminently taxable

Who then funded their own retirement and saved the DWP having to pay them benefits. ;)

I can hold my head high. :D

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But if they merged income tax and NI, how would the government know which money to put in the big national insurance pot it has been steadily accumulating for the last 55 years?

It has been doing that, right?

Right?

Wrong. All previous generations have paid for the retirement of the generations before, a concept that seems alien to Generations X+Y.

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Wrong. All previous generations have paid for the retirement of the generations before, a concept that seems alien to Generations X+Y.

The large Boomer generation had to support a fairly small interwar generation through 5-10 years of frugal retirement and lower healthcare spending, and now the fairly small X+Y generations are being asked to support the large Boomer generation through 15-20 years of retirement with a higher standard of living and much more healthcare. There is a difference.

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This would be a very sensible thing to do as would increase tax on high pensions dividends and rental and other unearned income allowing a slightly lower total rate for the working stiffs , there would also be higher tax relief on pension contributions thus creating a bit fairer situation between the public and private sectors,

There would undoubtedly be howls of protests from the final salary public employees but this way would be easier to get through than simply cutting the pensions of the better off so it should work well if the lower level allowances are increased.

All sorts of crazy distortions could be fixed in one go too and possibly cgt and dividend taxes aligned with income tax if you were trying to be very fair,

The question would be is a fairer tax system what they want or are the current loopholes reducing tax for the very wealthy something that the MP's want to keep in place at all costs ..... ?

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