Merging NI and income tax

[longfingernails]

There are rumours that George Osborne will merge NI and income tax in the Budget.

What a superb idea!

Simplify the system, and make Britain's true ~65% income tax apparent to all - then cut the true income tax rate by scrapping more quangos, cutting red tape, and clamping down harder on benefit scroungers.

No more will future Labour governments be able to hike the income-tax-in-all-but-name.

Anything that simplifies the tax system gets my support. I'd also like to see a flat rate rather than the current tiered system... but that's never going to happen :)

Flat rate - so that would include NI would it - scrap the upper earnings limit?

Do you two steal sweets from children in the street too?

NI money is just tax. A simple flat-rate income tax and a personal tax-free allowance that applied to everyone equally ... why is that deserving of sweet-stealing accusations? The principle stands that those that earn the most pay the most, we'd lose the disincentive to earn more because there would be no HRT threshold to bump up against and it would be far easier to calculate taxes due.

totally agree on scrapping NI and having a single tax, it is no longer a "national insurance" and is used to raise taxes without affecting the headline rate.

I'm a basic rate tax payer and receive tax credits, my marginal "tax" rate is actually 73% when you include income tax, NI and tax credit claw-back.

NI is one of the most contentious taxes on the poor, they only steal sweets form from poor children in the streets and leave rich kids to stuff their faces.

A tax that drifts away the more you earn the less you pay isn't ever going to be fair or seen as fair

I disagree strongly with this. It would mean large rises for pensioners (who currently pay no NI) and who have limited or non-existent opportunity to do anything about altering their income stream.

It wouldn't have to mean large rises for pensioners - it could be combined with an increased age related allowance.
I would also do away with the different rates of dividend tax.

It would hit badly those who have been retired early (eg on medical grounds) who would not benefit from age-related adjustments and who have already similarly missed out after the abolition of the 10% tax band.

How would it interact with dividend tax? I thought that was completely separate.

NI is completely separate from dividend tax, in that dividends are not subject to NI. But if NI was abolished and a "composite rate" introduced what would it apply to?
Currently dividends are taxed at a different rate to other income, my point was that I would like to see this abolished and dividends to be taxed at the normal income tax rate.

That would be a big hit for pension funds.

Yes it would.
It would also be a big hit for the (how many??) small company business owners who are paying themselves a nominal salary and dividends.

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.

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

Here is something.

here

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

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

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.

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.

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.

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

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 :)

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.

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 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.

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

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.