The Office of Tax Simplification (OTS) has called for National Insurance contributions (NICs) and Income Tax to be brought closer together to create a simpler and fairer system for business and taxpayers.

In a new report, OTS note that taxpayers today have much more varied working patterns than they once did. National insurance was designed for the working patterns of yesterday, when a single job (often for life) was more common. The Government asked the OTS to investigate whether national insurance could be simplified, to create both a simpler and a fairer system that supported modern working patterns. This report builds on a report in March 2016 and sets out the case for NICs reform, with an indicative five year timetable.

The OTS has found that:

• it is widely acknowledged that national insurance is out of date. It no longer supports modern working patterns, and creates unfair outcomes between taxpayers
• it is complex to administer, and this makes it difficult for taxpayers to understand how much they should pay and the impact it has on their entitlement to benefits
• a simpler, and fairer, system would treat everyone’s earnings in the same way, for both income tax and national insurance. This means that national insurance would be calculated in the same way as income tax, making it easier to understand
• this could change the amount some people pay, but would not raise taxes overall
• there is widespread support for the OTS’s reform proposals.