Merging NI and income tax

Of course HRT payers start to lose their personal allowance once their income is greater than £100k (I think). The highest rate tax payers (£150k plus) get no personal allowance and pay 50% tax. One of the highest tax rates in Europe.

Absolutely I agree with you about making the whole thing simpler. If we had a flat rate of 30%, say, that applied to everyone equally and applied to everything earned over £10k then those on a higher income would pay the most and those on a lower income would pay the least. Pensions would be funded out of the general taxation.... accountants would be twiddling their thumbs :)

PAYE itself will have to be reformed soon. It's far too slow and cumbersome for today's more mobile workforce. It's OK if you stay in the same company for your whole career but, if there are any changes to your pay, benefits or employer, it can take an age for the whole thing to catch up. (Speaks from experience!)

So HRT earners will pay income tax on a larger proportion of there income and 9% less NI on the high rate of their income.

Which justs adds to the point that the tax system is so complex it would be far better to have a simpler tax system that was on a sliding scale that the more you earn the slightly more you pay in tax - rather earning more and paying less and earning more and paying more and earning less and paying more and earning less and paying less as we do now

HRT payers enjoy a tax free allowance, then pay 20% tax and 10% NI same as everyone else up to the HRT threshold. Then they pay 40% plus NI up to the cap. A capped NI is fair if we designate that it is to pay for a state pension which has a fixed maximum.

If/when the tax free personal allowance increases to £10k, HRT payers won't get that ... which was my point earlier. The tax-free allowance for HRT payers will remain down at £6k or so. Only people on low incomes will get the £10k personal allowance. So introducing a £10k personal allowance doesn't benefit everyone equally.

HRT pays don't pay 40% income tax on all there earning, they pay 20% on lower earnings - or are you saying the HRT pay 40% from 6500k if they earn over 42k?

Because we all get back the same pension when we hit retirement age, there's a cap on contributions. HRT payers pay 40% income tax + 1%... you're paying 20% income tax + 10%... I'd say you're getting a pretty good deal.

I tried following the link above, but the article was behind a paywall. Looking at others (from other newspaper), it seems that all there is at the moment is a statement that Osbourne is personally "in sympathy" with the simplification agenda, that changes would be on a long term timeline, not a sudden change, and that this is being discussed in terms of taxes on earnings (which would take all pensioners out if the equation).

No word on contributions based benefits - presumably these would have to be abolished first? Reform to state pension being the biggie, presumably.

But chil - HRT pay 1% NI over what 42k - where as I pay 10% NI on all Ni taxable earning...

@ivykaty... the tax-free allowance will be reduced for HRT payers on a sliding scale. When it goes up to £10,000 for those on low incomes, HRT payers will still be paying tax on a large proportion of it. The headlines look good but the devil is in the small-print.

ivy - the pay rate you start paying higher rate tax has been lowered. this means that people who earn around 40k who previously didn't pay 40% tax now will. so they will in effect pay more as they will pay at 40% instead of 30%

newwave - closing public services doesn't benefit the rich either. where some services are being cut here the council is asking the better off people to pay for them (over and above the payment they've already made as part of the rates)

dreamingofun - the policies so far don't seem to be benefiting the rich - raising the level you start paying income tax

How does that not benefit the rich - if we raise the level of which you start paying tax to £7.500k from £6.500k then everyone starts at that point rich as well as lower incomes

I would like ni and income tax to be treated in the same way. Due to the seasonal nature of my work I overpay both tax and ni. I can claim the tax back but not the ni which is a bit annoying.

Forgot to add it should also reduce the amount of bureaucracy at HMRC.

I think its a good move because it helps to simplify the tax system for individuals and businesses which I think could be a big help to SMEs. As a general rule I think the simpler the tax system the better, although I don't want a flat rate.

hudd, how is this positive, I am well aware of my salary deductions I dont need to have NI and tax combined to work out how much the total is

I've long thought that the Government should look at combining income tax and national insurance so I think this could be a positive move.

dreamingofsun

How about freezing benefits, closing public services etc, all things need by the poor and not used by the rich.

BTW love the name because that is what I constantly do :)

sorry meant to say 'lowering pay level that higher tax rate kicks in'.

newwave - the policies so far don't seem to be benefiting the rich - raising the level you start paying income tax; lowering higher tax rate; making students with better off parents pay subsidise poorer students (however much they both end up earning); aboloshing child benefit.

I would be very suprised if anything the Tories do regarding tax and NI is not biased towards the rich and at the expense of the less well off.

captainnancy - local income tax is one of the unfairest things i've ever heard of. i live in a close of retired people who are loaded who would pay very little. we on the other hand earn a lot but have loads of outgoings - as we all do - feeding, clothing children and childcare, mortgages, 2 cars for work........ why should we pay far more than our neighbours when we have far less money?

It would crucify the youngsters as it doesn't take any account of ability to pay - ie massive mortgages/rent and don't get me onto student debt and paying that off.

Or rather it is something that wil probably turn out to be Really Important but doesn't really ignite any strong feelings..........

Here is something.

here

Ws starting to talk to DH about it last night but it isn't exactly a Hot Topic.....

BTW, any links to these rumours? How well sourced are they?

I think it would be a good idea to merge the 2 and have one taxation, but I also wonder how it would work for self employed and clas s 2 contributions. A higher personal allowance would be the best idea- £10k minimum I think. Why on earth are we taxing people on less than that then giving them credits back? ridiculous system!

I think it's a bit of a cheek that a HRT payer should pay 1% NI on those earnings, why not be more upfront about what people's taz burden is?

I think council tax should be replaced by a local income tax too.