Alignment of taxes

The Office of Tax Simplification has set out seven steps for aligning income tax and national insurance contributions

Ahead of the Budget, the Office of Tax Simplification issued its report, The closer alignment of income tax and national insurance, in which it sets out seven steps for bringing the two taxes closer together. They are:

  1. moving to an annual, cumulative and aggregate basis for national insurance contributions (NICs)
  2. basing employers' NICs on whole payroll costs and renaming the charge
  3. aligning the self-employed NICs more closely with the employees’ NICs and benefits
  4. improving transparency for NICs and the contributory principle
  5. aligning the definition of both earnings and expenses for income tax and NICs
  6. bringing taxable benefits in kind into class 1 NICs
  7. having a joined-up approach for income tax and NICs laws and practice

The report highlights that 'if alignment is pursued [it] will impact on millions of people - it’s estimated that 7.1 million will pay less NICs but 6.3 million will pay more NICs.'

Section G of the report, 'Comprehensive list of misalignments and differences', compares income tax and NIC legislative differences, while Section E is devoted to international comparisons.