Osborne may introduce radical shake-up of income tax

The Chancellor wants to merge income tax with national insurance if the Conservatives are re-elected in 2015, it has emerged. George Osborne hinted merging the two taxes into one "earnings tax" will be in the Conservative manifesto.

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What does national insurance pay for?

  • Dating back to 1911, national insurance was first implemented so working class people had some insurances against illness and unemployment.
  • This was expanded after WW2 to help fund the NHS and other social security schemes.
  • The Government has set national insurance at 12p for every pound earned.
  • It has grown up in parallel with income tax, which traces its roots to the 18th century and is administered separately.

Osborne wants radical tax shake-up after 2015

Income tax and national insurance will be merged into one "earnings tax" under plans the Chancellor is considering for the Conservative 2015 manifesto, it has emerged.

The Chancellor believes merging the two taxes will make the system easier to understand. Credit: PA

Reported in the Times, George Osborne is said to be planning to simplify the tax system by combining the two taxes, which come straight out of almost every worker's pay packet.

David Cameron's closest ally was said to be considering the change for last year's budget, but backed out because of problems integrating computer systems.

The move would mean basic-rate taxpayers handing over 32% of their earnings and higher-rate taxpayers returning 52%.

Employers’ NI contributions are likely to remain unchanged under the plan.

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