How to raise £60 billion for public services: our ten tax reforms
The UK’s super-rich have accumulated record levels of wealth in recent years, while our public services have been decimated and inequality has soared.
Increasing numbers of people are being pushed into poverty, at the sharpest end of an ongoing cost–of-living crisis.
The wealthiest people and corporations are also fuelling climate breakdown, through excessive consumption, harmful investment choices and political power.
This growing wealth inequality led our allies at the Fairness Foundation to warn that our democracy and society themselves are under threat from breakdown.
Something has to change to get us off the destructive course we’re on.
That’s why alongside Tax Justice UK we are putting forward ten tax reform proposals that could simultaneously reduce wealth inequality, boost public services and tackle the climate emergency.
The UK has vast concentrated wealth
The UK has the sixth largest economy in the world, but this wealth is a largely untapped resource, held by a tiny proportion of the population.
According to Joseph Rowntree Foundation, as of 2021, the top 10% of the UK’s population owned an enormous 57% of the country’s wealth, while the bottom 50% owned less than 5%.
The UK’s unequal tax system is stacked in favour of the super-rich, fuelling this inequality.
Loopholes riddle our tax system
Unfair loopholes and far lower rates of tax on income from wealth than work mean the wealthiest in our society often pay proportionally lower taxes than the average person, ensuring they get richer at a faster rate.
Most tax revenue comes from taxes on work, not wealth. Taxes on work currently bring in almost half of all government tax receipts. While taxes related to wealth, such as capital gains and stamp duty, are only set to bring in less than 5% of tax receipts.
Former Prime Minister Rishi Sunak – from one of the 250 richest families in the UK – paid just 23% in tax in 2023 on his £2.2 million in earnings. That’s a lower rate of tax than a teacher.
Support for taxing wealth more
Taxing wealth more has strong and growing support, from respected economists, think-tanks and international organisations including the OECD and International Monetary Fund (IMF).
Polling shows that the public and 65% of millionaires themselves want the wealthiest to pay more, and are more likely to vote for a party that commits to higher taxes on the wealthiest to invest in public services.
Politics is about choices. Cuts to public services, growing inequality and climate breakdown are all avoidable. We urge the government to consider these policies.
We’re making progress
The October budget was a welcome downpayment to fix our public services, paid for in part by a set of mildly progressive tax rises, including closing loopholes in inheritance tax and the windfall tax for oil and gas companies, and scrapping the unfair non-dom scheme.
However, the changes made in last year’s budget do not go far enough to truly fix our public infrastructure or improve living standards. The policies below outline how we can get there.
Ten tax reforms to raise over £60 billion a year
1. Apply a 2% tax on assets over £10 million, to raise up to £24 billion a year
A wealth tax on assets exceeding £10 million would require individuals with total wealth above this threshold to pay a 2% tax on the excess amount. It could raise £24 billion a year. Setting this tax at a high threshold of £10 million in assets would ensure that only a tiny proportion of the population are impacted – just 0.04%, or 20,000 people – yet would raise significant funds for our public services. These are some of the UK’s wealthiest people, who possess a diversity of assets. This means they would be able to pay without having to sell property or experiencing a significant change in their financial situation. The relatively small number of people impacted would also make this tax much easier for HMRC to administer. This change would ensure that people who have benefited enormously from economic changes and inherited wealth pay their fair share.
Momentum is growing behind a ‘tax on £10 million’, including from think-tanks, politicians, unions, journalists, a former advisor to Tony Blair and 138 NGO leaders from the international development sector. These calls are supported by the general public and millionaires themselves: our own research found that 72% of respondents supported a ‘tax on £10 million’, and polling from Patriotic Millionaires UK shows 65% of UK millionaires support a 2% tax on assets over £10 million to help fund public services and tackle the cost of living crisis. The groundwork for such a tax is already well-developed; CenTax provides a comprehensive framework showing how it could work in practice.
2. Reform the Capital Gains Tax system through increasing rates and closing loopholes, to raise around £12 billion a year
Capital Gains Tax (CGT) – the tax paid on profits made on the sale of an asset – is one of the UK’s most dysfunctional and economically inefficient taxes, characterised by unfair loopholes and rates. While Rachel Reeves made small tweaks in the October 2024 budget, raising the main and higher rates to 18% and 24%, this still leaves the UK’s CGT rate as the lowest in the G7 – something Britain’s crumbling public services cannot afford. The Chancellor’s reforms are set to raise £2.5 billion by 2029-30, whereas a full package of reform could raise a further £12bn a year (£14.3bn in total), create a more equal tax system and support economic growth.
To achieve this, as outlined by CenTax, the government should equalise CGT rates with tax rates on income, reform the tax base through closing down avoidance loopholes – removing the unfair death uplift and implementing an exit tax – and introduce an ‘investment allowance’. This proposal has huge cross-party support, including from centre-right think-tanks and Conservative politicians. There are strong arguments that these changes would support investment, productivity and growth, if accompanied by higher allowances, including from IPPR, CenTax and the Institute for Fiscal Studies.
As a first step, the government could reform the base without increasing rates, through closing unfair loopholes by implementing an exit tax or removing the death uplift. This would still go some way to making the CGT system fairer, while raising significant revenue.
3. Close the carried interest loophole so private equity bosses pay their fair share, to raise an additional £510 million per year
Carried Interest is a share of profits from a private equity, venture capital or hedge fund earned by private equity bosses – a tiny fraction of society (0.01%) who possess an enormous amount of wealth. The tax treatment of carried interest, currently taxed as a capital gain, is highly controversial, unfair, and in need of reform. According to CenTax, men make up an enormous 85% of recipients and receive 96% of all ‘carry’. The £510m a year figure comes from CenTax’s research.
As announced in the October 2024 Budget – from April this year, the Capital Gains Tax rate applied to carried interest will increase from 28% to 32%, before transitioning to the Income Tax framework from April 2026, amounting to an effective tax rate of 34%. This increase is welcome, but still falls far below the top Income Tax rate of 45% paid by the highest earners, and is forecast to bring in just £85 million by 2029-30. Ultimately, these changes will preserve significant and unfair advantages to private equity bosses.
It is crucial that the government uses the next Budget to ensure carried interest is taxed fully in line with other forms of income. President Trump is also looking at closing this unfair loophole. Research by CenTax estimates that fully equalising the tax rate on carried interest with the top rate of Income Tax would raise between £0.3 and £1 billion per year, calculated as £0.51 billion when the changes introduced in the 2024 budget are taken into account.
4. Properly tax income from wealth, by applying National Insurance to investment income, raising up to £10.2 billion a year
Currently National Insurance is paid on income from work but not investment, such as dividends from shares, rent from property, and interest on savings. This means that landlords who don’t have a mortgage, earning huge sums of money during a housing crisis, are paying a lower tax rate than their renters whose only income is from their job. It is fair and right that the government should expand the tax base to income from investments. This would simplify the tax system’s treatment of different types of income and ensure that income from wealth is taxed at the same rate as earnings from work. The £10.2bn figure comes from CenTax research.
5. Introduce a 4% tax on share buybacks, raising between £0.1 – £2 billion a year
Some of Britain’s largest companies are transferring profits to their shareholders at record levels, as a means of avoiding paying taxes. And at present, UK companies are buying back their shares at a faster rate than even US groups. According to IPPR, if the UK implemented a share buyback tax at 4%, it could raise between £0.1 – £2 billion by 2025/26. If buybacks are to remain at their 2024 level for the full parliament, this change could bring in an additional £9 billion overall. Taxes on shareholder transfers would help ensure that companies are not channeling profits to their shareholders and encourage investment in the real economy, which would support economic growth.
6. Make the oil and gas windfall tax permanent and introduce an excess profits approach
It is right that this government closed loopholes in the windfall tax for North Sea oil and gas companies in the October budget, through increasing the rate of the Energy Profits Levy (EPL) from 35% to 38% and removing the investment allowance. This is set to raise just under £1 billion by 2029-2030. But this is a temporary measure, and they currently plan to revert tax rises to prior, radically low levels in 2030. Instead, a permanent mechanism should be introduced which considers all excess profits, including windfalls, to break the UK’s cycle of hiking and slashing headline tax rates. Windfall profits only include those unexpectedly arising from external events, such as the war in Ukraine. An excess profits tax approach would also include excessive profits for other reasons such as monopoly power and network effects. According to Oxfam, this could have raised between £2.2 – £4.4 billion in 2022, more than double what the government’s changes are forecast to bring in.
7. End and redirect fossil fuel subsidies for oil and gas companies to raise £2.2 billion per year
Taxpayers subsidise oil and gas companies in the North Sea for activities such as exploration and decommissioning, which is incompatible with the UK’s climate commitments and drives costly climate damage. According to Oxfam this would in practice mean choosing to invest existing revenues differently, away from enabling polluting practices and towards climate action. They found that between 2017-2021, the UK provided around £2.2 billion of support per year to fossil fuel producers – funding that could, for example, support communities impacted by flooding or bring the UK closer to its goal of becoming a ‘Clean Energy Superpower’. The OBR estimates that between 2022 and 2027, £25.3 billion will be spent on new oil and gas projects. By providing billions in subsidies to fossil fuel producers, not only is the UK Government losing this vital revenue, but it is pushing companies to continue investing in harmful fossil fuels rather than climate-just alternatives.
8. Tax private jets more, to raise at least an additional £1.2 billion per year
Private jets release up to fourteen times more carbon per passenger than commercial flights, and the UK has more private flights and pollution from private jets than any other country in Europe. Therefore, the government’s commitment in the October 2024 budget to raise the higher rate of Air Passenger Duty (APD) by 50% for larger private jets, is a welcome and long-overdue change. But even with these changes, APD will remain an incredibly unfair tax, with disproportionately less impact on the super-rich than those taking ordinary flights, and only larger private jets subject to the higher rate.
As such, we welcome the government’s consultation on extending the scope of the higher rate to include more private jets, and strongly hope this results in this rate being extended to include all private jets regardless of weight. This would raise much needed additional revenue, and even at the higher level, experts calculate APD will still only account for no more than 2% of the average cost of a private flight. In addition, despite the fact private jets are a luxury only a fraction of people can afford, most are still not subject to VAT or fuel duty – taxes the rest of us pay everyday – making it easier to continue emitting huge amounts of pollution. Levying VAT and taxing fuel, along with landing and departure slots, is the fair thing to do and could raise significant revenue. According to Oxfam, this would have raised up to £1.2 billion more in 2023.
9. Properly fund and resource HMRC to tackle tax abuse and end unfair reliefs
The government’s commitment to increase investment in HMRC is very welcome. This is forecast to raise £6.5 billion in 2029-2030, vital funds needed to tackle tax avoidance and evasion, which would raise further revenue to support our communities and economy. However, the UK’s tax gap currently sits at a huge £40 billion, showing there is still much more that must be done to ensure everyone is paying their fair share, something that can only be achieved through additional funding and resources.
The UK tax code is the most complex in the world, littered with tax reliefs, many of which are unfair, inefficient, and favour vested interest groups and multinational corporations. Even HMRC – the UK’s tax authority – recently admitted it only knows the cost of 365 of the UK’s 1180 tax reliefs. A 2024 report by the National Audit Office (NAO) found that non-structural tax reliefs cost an enormous £204bn in 2022/23 – nearly £30 billion more than the entire NHS England budget for 2024/25. The Video Games Tax Relief (VGTR) cost £197 million in 2022, more than five times more than anticipated. Despite being designed to help independent developers produce “culturally British” games, evidence shows it is large, multinational firms that benefit from the lion’s share, such as US-owned company Rockstar who received 41% of all VGTR paid out in the UK in 2021-22.
As a first step, the government should properly audit and evaluate the cost and impact of all tax reliefs on a regular basis, to feed into the spending review cycle.
10. Stop rich multinational corporations evading tax by mandating they declare profits wherever they operate, to raise just under £15 billion a year
The vast majority of multinational companies refuse to disclose how much corporation tax they pay here in the UK or any other country. This lack of transparency means the government has no way of knowing if they are paying their fair share of taxes, making it easier for companies, like Amazon, to shift their profits to tax havens. Across the globe, 36% of multinational profits are artificially shifted to tax havens each year, leading to a US$226bn reduction in corporate income tax revenues. Using 2021 data, the UK was found to suffer a staggering £71 billion of profit shifting, leading to an estimated £15 billion loss in corporation tax revenues.
It is crucial the government mandates multinational businesses operating in the UK to publish a breakdown of exactly how much income, profit and tax they generate here and in all other countries – known as ‘public country by country reporting’ (pCbCR). The UK government agreed this was merited in 2016, but has yet to implement this power. Increasing numbers of nations are mandating pCbCR – from the EU to Australia – where there is evidence of reduced use of tax havens and profit shifting, and increased effective tax rates and domestic tax revenue mobilisation. The UK must follow suit – not just to raise significant revenue, but to restore its credibility as a global leader in tackling tax abuse.
Note: These revenue figures are estimates based on research from government institutes, academics and think tanks, in particular the work of economists Dr. Arun Advani (University of Warwick) and Dr. Andy Summers (London School of Economics), of CenTax. The figures cited in this paper should be taken as indicative estimates, since revenue calculations for tax changes are difficult to estimate as dynamic and behavioural effects can be uncertain, and while we have tried to take into account changes introduced in the October 2024 budget, some revenue estimates may be impacted. Read our full briefing which includes explanations of how we reached our revenue estimates (download PDF).