Alignment of income tax and National Insurance

The Office of Tax Simplification (OTS), which gives the government advice on simplifying the UK tax system, is currently engaged in a project that will offer increased insight into the alignment of income tax (IT) and National Insurance contributions (NICs) – seeing whether they can be charged over the same period and on the same things.

It was announced in the Summer Budget 2015 that the OTS will carry out a review into closer alignment; the overall aim of the project is to build on the OTSs previous work, including its recommendations, with regards to understanding the different stages of improving the alignment of IT and NIC.

The OTS is currently engaged in an extensive series of meetings with a variety of businesses, representative bodies, professional advisers and other stakeholders on the closer alignment of IT and NIC.

To give its review a framework, the OTS has developed the following areas for discussion and debate:

  • Background – general thoughts and observations on the pros and cons of aligning IT with NIC
  • Present structure of IT and NIC
  • Distinctions between how IT and NICs are defined
  • Distinctions between how IT and NICs are administered
  • Employed vs self-employed
  • Employers’ NIC
  • General administration
  • The contributory principle
  • International experience – top three areas of alignment if wholesale alignment of IT and NIC is not feasible or practical

The OTS has said it welcomes comments from those it is not meeting and, to aid communication and help the process run smoothly, it has published the key questions it is asking in order to guide responses. Respondents do not need to answer all of questions, and are not required to comment on every area noted.

If you wish to contribute to the review on IT and NIC alignment, or arrange a meeting with the OTS, email mailto:ots-tax-nics@ots.gsi.gov.uk.

The OTS is also in the process of compiling a survey, which it will be published on GOV.UK in the near future.