The Office of Tax Simplification (OTS) has launched a consultation to establish where the complexities lie in the differences between income tax and national insurance (NI) contributions, and to seek views on how the system could be simplified.
The government has commissioned the OTS to examine the potential for aligning income tax with NI contributions.
Complexities might include differences in the definition of income, depending on whether an individual is employed or self-employed, and the treatment of expenses and employee benefits.
The consultation is mainly aimed at agents, payroll providers and employers, as well as employed and self-employed individuals.
It will close on 31 December 2015.
Nathan Long, head of corporate pension research at Hargreaves Lansdown, said: “Nobody would willingly choose the complexity that comes from a separate tax and NI system. However, with a multitude of different tax rates for different benefits and quirks within the system it looks like things could get awfully complex, time consuming and costly to make any meaningful changes.
“Tweaks to salary sacrifice in particular risk undermining employer support for auto-enrolment. As well as being more tax efficient for employees, many businesses introduced salary sacrifice to offset their increased cost of workplace pension contributions.”