Income tax & NICs reform a nettle that needed grasping, says CIOT
The Chancellor’s announcement of a study into the integration of income tax and national insurance contributions (NICs) has been welcomed by the Chartered Institute of Taxation (CIOT). The CIOT has long argued that the inefficiencies and administrative burdens caused by the separate levies need to be addressed.
Vincent Oratore, President of the CIOT said:
“We congratulate the Chancellor on finally grasping a nettle that successive administrations have shied away from. As the Office of Tax Simplification report has shown, there are real admin savings, especially for employers, in harmonising the way the two taxes are run. This is a complex issue and it is clearly right to study it carefully – but we must make progress on this important issue.
“It was sensible to reassure pensioners that any changes will not result in NICs being charged on pensions, nor savings income.
“However, we are disappointed that he has ruled out considering the abolition of the contributory principle. With the announcement elsewhere in his speech of moves towards a flat rate pension, the burden of running the contributory aspects of the system may outweigh the benefits.”
Notes for editors
- The Chancellor’s announcement of a consultation on the integration of income tax and NICs foreshadows a document being published ‘later this year’. The document will set out the differences in the current income tax and NIC systems and options for change. The main areas of difference are currently:
- Differences in the definition of income subject to the two levies;
- The annual, cumulative system for income tax/PAYE and the weekly, largely standalone system of NICs;
- The varying types of contribution of NICs, including Class “ and Class 4 for the self employed; and
- The residual link of NICs to the state pension and some contributory benefits.
23 March 2011