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Budget 2012: Government moves forward with plans to merge income tax and National Insurance Contributions


The chancellor George Osborne has reiterated his intention to merge income tax and national insurance contributions.

Speaking in his Budget speech this afternoon, the chancellor said he would push forward plans to do so and intends to publish the findings of a consultation on this over the next month.

He said this was part of a plan to make the tax system "simple and predictable" and one that supports work.

He added: The first goal is a far simpler tax system, which businesses can easily navigate and where ordinary taxpayers understand what they are being asked to pay. ??So we will radically change the administration of tax for our smallest firms.?? Last year, I asked the Office of Tax Simplification for recommendations. ??They have proposed that we tax small firms on the basis of the cash that passes through their businesses, rather than asking them to spend a huge amount of time doing calculations designed for big business. ??I agree.

"So we will consult on this new cash basis for calculating tax for firms with a turnover of up to £77,000 – double what the Office proposed.??This will make filling in tax returns dramatically simpler for up to three million firms.?? We are also pressing forward with our ambition to integrate the operation of income tax and national insurance I announced at last year’s Budget – so we don’t ask businesses to run two different payroll tax administrations.

Commenting, Richard Mannion, national tax director at Smith & Williamson, said: "This is a no-brainer and the Government should do it, but I think it'll be a long-burn project and we won't see it until after two parliaments."

Carol Dempsey, partner at PwC, added: "This is a great idea, but it's going to be a huge job. Income tax and national insurance have grown up separately, so it'll be a long-term aspiration to merge them."

Additional reporting by Tim Soare