NI and Income Tax merger draws a step closer

Accountants in London and around the rest of the UK will have much to think about as they digest George Osborne’s budget speech.

The Chancellor began by saying the budget was about reforming the UK’s economy and creating stability so that we can see sustainable growth, lower interest rates and additional jobs.

He said the government now had a credible and comprehensive plan and did not need to ask the British public for more.

After going through the usual forecasts he told us of his four economic ambitions for Britain. The first of these is for our tax system to be the most competitive of the G20 nations. Taxes should be efficient, easy to understand and simple to comply with. Sadly there was no mention of abolishing IR35 although the Chancellor did say that 43 complex tax reliefs would be abolished. In a moment of humour, Osborne said the ‘millenium gift aid scheme’ would go – after all it won’t be needed for another 989 years!

On a more serious note, the Chancellor said he was launching a consultation into the merger of National Insurance and Income Tax. This will take years to complete but will dramatically simply the tax system.

As from April, corporation tax will reduce by 2% instead of the 1% originally announced. This, Osborne said, will give the strong message that Britain really is Open for Business.

There had been hopes that he would do away with the 50p tax rate and he did admit that it would damage the economy if it were here to stay permanently. However, now is not the right time to get rid of it he pointed out. The Chancellor has asked HMRC to find out how much revenue it raises before making a final decision.

We were also told that in 2008 the Revenue lost £14 billion through tax avoidance and evasion. The government has now published their new strategy for tackling tax avoidance and will be taking specific action to close down open abuses that have carried on for too long unchecked.

Over the coming days there’s bound to be plenty of reaction to the measures announced yesterday. But only time will tell whether this budget does provide much needed growth.

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