Income tax and national insurance (NI) may be merged in a shake-up of the tax system.
Chancellor of the Exchequer George Osborne has commissioned a study into reforms that could lead to the creation of a single tax on earnings.
The aim of the consultation is to conduct a cost-benefit analysis of the steps that would need to be taken on order to align the two taxes and will consider the need for change, how NI contributions are calculated and how any potential changes would fit in with wider government initiatives.
Conducted by staff at the Office of Tax Simplification (OTS), further consideration will be placed on the effect these changes will have on the taxpayer and understanding of the system, as well as the effect on compliance burdens.
The review was requested by David Gauke, financial secretary to the treasury, following the summer budget report. Gauke said: "This is an area often cited as a major source of complexity for taxpayers. I would like the OTS to look at what the impacts, costs and benefits of closer alignment would be and to set out what the necessary steps would be to achieve closer alignment."