Should NICs be payroll-based?

Employers are being consulted on potentially making their national insurance contributions (NICs) a payroll-based charge.

The move is being considered as part of the Office of Tax Simplification’s (OTS) work into the possible merger of NICs and income tax.

At the same time the OTS will consider the impact of moving employee NICs to an annual, cumulative and aggregated basis, similar to PAYE for income tax.

The OTS will report its findings before the Autumn Statement later this year.

The OTS’ report recommendations will aim to make the administration of the NICs system simpler to deal with for individuals, businesses and advisers; improve understanding and transparency; and be cost effective for business and individuals on their administration burden.

They should also be attainable within around five years.

The OTS’ initial report in July into the potential of bringing income tax and NICs closer together found two main problems with NICs:

the same annual earned income, derived from different working patterns, could result in a different NICs outcome,

the charge on employers was directly related to individual employees, but did not impact their contribution record.

It is now seeking to investigate the potential for remedying these issues with this latest work.

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