Osborne set to tinker with the tax code

GEORGE Osborne will outline his intention to simplify Britain’s unwieldy tax code when he unveils the Budget on Wednesday, including a proposal to simplify national insurance contributions (NICs) and income tax.

The chancellor is considering a plan that would let employers pay NICs and income tax in a single combined payment rather than separately.

Treasury sources claim this would cut down on paperwork and so reduce costs for firms while making the process simpler for the self-employed.

However, employees would still get a pay slip with NICs and income tax deducted separately, according to a Treasury official.

The change was recently proposed in a report by the Office for Tax Simplification, which has been charged with slimming down the tax code.

Tolley’s Tax Guide is now so long that the world’s fastest speaker would take about five solid days to get through it.

A Treasury source said there would be “nothing in terms of hard physics” at the Budget but that Osborne would “give a flavour” of his tax simplification agenda.

The NICs proposal is one of a series of “micro-reforms” in the Budget designed to kick-start growth.

Osborne is hoping that a series of smaller changes designed to aid businesses will add up to something more significant.

He is also likely to make sweeping changes to the planning regime to encourage firms to expand their premises and to boost housebuilding.

The chancellor is likely to come up against stiff opposition to the planning changes, both from local communities and councils.

But he will point to the OECD’s decision earlier this week to downgrade its 2011 growth forecasts for the UK from 1.7 per cent to 1.5 per cent as proof the government needs to do more to boost growth.

There is a recognition among senior cabinet ministers that the government’s time has been eaten up with reforms in education, welfare and health at the expense of supply side reform to grow the private sector.