OTS proposes income tax and national insurance merger

The Office of Tax Simplification has urged the Government to integrate income tax and national insurance contributions in its interim report on small business tax.

The recommendation comes as part of a review of the taxes imposed on small businesses. The OTS also suggests introducing a “radical new approach” to taxation for the smallest unincorporated businesses

In its report, published today, it says: “The integration of income tax and national insurance, including reducing the differential between rates applicable to different incomes and legal forms, could, for example, remove much of the pressure on the employment and self employment boundary and should result in the IR35 legislation becoming obsolete.

“Obviously, the position of pensioners, who currently do not pay NICs will need to be considered thoroughly.”