Mark Groom, Partner in Deloitte's employment taxes group, said: "The Chancellor's announcement that the Government will consult on merging the tax and national insurance schemes is a bold move. We welcome the intention to harmonise employment income, but the key challenge here is around pension contributions. The single person income tax allowance is £8,105 whilst the equivalent allowance for NIC is around £5,500. To lift one allowance up to the other would be costly.

"Perhaps the greater challenge though is that national insurance doesn't apply to pension and savings income and won't in the future either, which means that full harmonisation can't take place."

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