Income tax and NI to be merged?

Goldwing1

This is a scary report.
http://www.independent.co.uk/money/tax/osbornes-secret-plan-to-raise-tax-ndash-and-scrap-national-insurance-2244091.html

If not watched closely it could spell more problems for pensioners, early retired by choice and those retired early on medical grounds.

Andy_Davies

It's only scary because The Independent choose to pitch it that way...

There's no reason for earned and unearned income to be taxed differently, it just creates an expensive to administer system that's full on inconsistencies, e.g. people who own companies can choose to take income as dividends that don't attract NI, people who carry on working past state pension age don't pay NI on their income, the rich who can afford to live off investments don't pay NI on their income etc.

There's no reason that a merged system can't be fairer and remove a whole swathe of low-paid people from the tax system all together, by allowing people to keep more of the money they earn then there's less need for benefits and the masses of civil servants we need to administer them.

Simplicity is generally better.

Andy

StevieJ

Simplicity may not be better if you are early retired, (for that read made redundant on a tiny pension and nobody wants to give you a job).

Goldwing1

StevieJ wrote: »

Simplicity may not be better if you are early retired, (for that read made redundant on a tiny pension and nobody wants to give you a job).

Exactly. More pain for those worse off already.

Possetjohn

It is going to be a very complex task to merge the two systems. In principle I approve of anything which can help to simplify our unnecessarily complex tax and NI system in the UK and it will help to stop the politicians hiding income tax rises as increases in NI:mad:

As someone who is part retired and self employed I don't particularly welcome it from what I have read already but let's wait and see what the proposals are and where the rates, tax free allowances and merged tax free bands end up!!

zagfles

Sounds like an excellent idea - provided there's some transitional relief for pension income since people generally didn't get NI relief on pension contributions in the past, so by incorporating NI into tax they'd effectively be paying NI twice on the same income.

It would also stop the self-employed getting an advantage by diverting earnings to dividends.