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Osborne could merge income tax and national insurance


Chancellor George Osborne could announce plans to merge income tax and national insurance (NI) into a single payment if they are re-elected in the next general election.

The plan was first suggested by the Office of Tax simplification in March 2011, however, consultation on tax reform has so far been pushed back due to the complexity of integrating the two separate systems.

The Times Newspaper said that the government came “within a whisker” of merging the two taxes in the 2014 Budget, but backed out as they felt the risk was two great.

If the plans were to be implemented, the basic rate tax payer would pay 32% income tax instead of 20%, however, they would no longer be expected to pay a separate tax for National Insurance.

Additionally, the higher rate tax payer would also be affected in a similar way, as their income tax rate would increase from 40% to 52%.

National insurance was first introduced in 1911 as a measure to help workers secure themselves against illness and unemployment. However, it was later expanded following the Second World War to help fund the National Health Service (NHS) as well as wider security programmes and is now charged at a basic rate of 12%.

“Something we could do in the next Parliament”

A source told the Times Newspaper that the plans would help to give workers a more understandable breakdown of how their taxes are spent. However, they have been unable to make the change so far because of the complications of implementing such a merger.

The source said: “We came within a whisker of doing this at the last Budget, but in the end we decided against it. They are currently on two separate computer systems and we thought the risk was just too great. But it is something we could do in the next Parliament.”

They also went on to deny any allegations that the potential merger is a cynical ploy to force pensioners into paying national insurance, stating that “your tax rate would automatically reduce if you are a pensioner”.

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