Taxpayers’ Alliance proposes steps to abolish NI

The Taxpayers’ Alliance has proposed three steps to abolish national insurance (NI) and simplify income tax with the goal of implementing a single income tax rate of 30% by 2020.

The report, How to abolish national insurance within five years, suggested that NI be fully merged with income tax in 2017, with the basic rate of income tax on labour income set at 36% and the higher rate of 40% remaining until 2018. Both rates would then be reduced to 30% by 2020.

The report also proposed the introduction of greater transparency on payslips, including renaming NI to better describe its function, detailing how much NI the employee and employer pays, and equalising employer and employee NI rates to 11% from April 2013.

The alliance also suggested simplifying NI rules and thresholds. The report called for NI to be charged annually per person, the same way income tax is, and for the social security regulations to be abolished, so that one set of rules defines earnings across income tax and NI.

The single income tax rate was proposed by The Taxpayers’ Alliance and Institute of Directors in May 2012 in The single income tax, the final report of their 2020 tax commission joint project. The project was set up to look at the entire UK tax system.