What taxes should the UK implement, reform or abolish?

[dcbwhaley]

I agree, and I would go further to suggest that we also have a misguided belief that debt in any shape or form is bad which is why "government borrowing increases" can be a bit of a scary headline. In reality there is good and bad debt, and I certainly wouldn't mind more borrowing to complete crucial infrastructure projects like HS2 because of it's long-term ability to help grow the economy. But people are also increasingly put off by tax increases, so it's only inevitable we'll start thinking of public finances like a wallet or bank account.


To be fair it's hard to imagine anything else when it's all we've known for decades, and with no disrespect to Starmer and Reeves they simply lack the visionary attitude that we could do better beyond slightly improved management of the status quo. Not to say Liz Truss was the answer of course, but there's certainly more than one way to change things.


Okay, I'll try again, and this time I'll add a bit of an explanation so that they aren't as meaningless as any proposed "wealth tax".

Land value tax

• Land is a finite resource that is just as natural as the air we breathe. Therefore if someone wants to own private sectors of land not for public use, then the value of the land should be taxed accordingly.
• Because people who own vast swathes of land will pay more than those who own little to none, it is a progressive tax, and the biggest landowners will making the biggest contributions.
• Because the land is costing you money, you will either have to make use of it through things such as housing developments, or sell it to someone who will make us of it.

Unfortunately it is not easy to make use of land through housing development. I own a plot of land which would accommodate a dozen houses. But the local authority will not grant planning permission. Should I be taxed for the fact that I use that land merely for grazing horses?

 

[Magdalia]

It does however provide cash for other investment, and from the government's point of view is a low interest rate compared to traditional gilts, which are currently at 4.6% yield for a 10 year investment.

I'm not sure raising the premium bonds limit would be super helpful though. Even additional rate taxpayers are likely better off investing in a global all cap index fund and taking the tax hit than buying premium bonds. They're handy as a shorter term investment with (relatively) decent liquidity, but I don't know how many people would do well keeping >£50k in premium bonds.

Premium bonds are not 10 year investments, they can be withdrawn on demand, and are therefore comparable with short term not long term borrowing. Lowest accepted yield for 1 month Treasury Bills last week was 3.75%.

But this discussion is supposed to be about tax, not borrowing. The important point is that people understand the difference.

 

[dcbwhaley]

They could also scrap the triple lock but the pensioner vote is too important to give that up. I'd say a double lock would have been better, where it keeps up with earnings growth or 2.5%, but not CPI inflation.

But earnings growth is generally higher than CPI so that would make no difference

 

[deltic]

There are plenty of complications. Especially if you do it differentially.

Those complications tend to come at the boundaries, where reducing benefits and increasing taxes intersect and make the marginal tax rate extremely high.

The extreme case is where someone’s income goes from £99,999 to £100,000 and they have small children. The increase in tax rate, combined with loss of free childcare and some specific effects to do with NI, mean the marginal tax rate is effectively infinite, and they will be out of pocket unless they can earn something like £25k more.

The point is not how dreadful things are in that particular circumstance, but the way that creating complicated structures can have serious unintended consequences. Remember, the Income Tax system is in theory designed so that as you earn more, you pay more, but you never lose more than you gain.

Not sure any of this is relevant to the point I was making which was to simplify the tax and benefit system with uniform rate of VAT and all income regardless of source treated the same. If a uniform rate of VAT reduces purchasing power of those on low incomes then benefits and initial income tax thresholds can be increased to compensate while clawing the money back on those who benefit with higher income tax rates. It is not difficult to design a tax and benefit system that does not have high marginal tax rates. At present the system is over complicated because some benefits are taxable eg state pension and others are not eg pension credits.

 

[styles]

Premium bonds are not 10 year investments, they can be withdrawn on demand, and are therefore comparable with short term not long term borrowing. Lowest accepted yield for 1 month Treasury Bills last week was 3.75%.

But this discussion is supposed to be about tax, not borrowing. The important point is that people understand the difference.

Correct, but unless there is a scandal surrounding NS&I, there will forever be a significant float. EVen accepting that we should only ever compare it with a 1 month treasury bill, 3.6% < 3.75%, so premium bonds are still a cheaper form of borrowing anyway.

This discussion is about tax, however it is prudent to point out that there are many ways of running an economy and the idea that in order to achieve our goals we must raise or cut taxes is often presented as the only solution, because we must cut the deficit etc. It's false, and there are alternatives, which other global economies have successfully implemented, and in particular the faster growing economies demonstrate regularly.

Fiddling about with the cap on the nil rate of IHT when passing on a home from £500k to say £750k is rearranging the deckchairs on the Titanic.

 

[DarloRich]

One i forgot: greater taxes on gambling of all sorts but especially online and slots

 

[Richardr]

Merge Income Tax and National Insurance and have more graduated rates ie increase bands in 5p points with all income taxed the same, ie dividends, wages, self employment, pensions, bank interest etc
Increase fuel duty and introduce a carbon tax
Have a single rate of VAT with no zero rating ie no exemptions and all businesses regardless of turnover liable to be VAT registered and charge VAT
Have a land tax payable by the land owner replacing council tax and business rates based on value of land regardless of its use - and rebased on a regular basis
Put all tax returns into the public domain and require any business selling items valued at more than say £50k checks purchaser against the tax register and report if income reported and expenditure are out of kilter.

I agree with virtually all you say apart from the final sentence, but there is no way any of these will happen.

Income tax is the closest we have to a relatively simple tax, but as you say, taxing NI on a completely different basis [monthly rather than annually and on some tax payers not others] and then complicating it by using it for other aims such as the High Income Child Benefit Charge and the tapering of allowances has not only made things more complex but has led to the highest earners not paying the highest marginal rate which is absurd.

I agree totally with you on VAT - it should be a simple tax to operate but it has been made so complicated it is a joke. Where there are desirable objectives, whether to keep food prices low or subsidize tampons for example, they should go to those who need via a simpler benefits system with vouchers for food or tampon purchases if necessary. However governments prefer messing around and making taxes ever more complex in part as otherwise government tax and spending both rise and they want to claim to keep both low.

As above I agree with a land tax, but am not sure what you mean by "regardless of its use". I assume you mean that all land owners will pay, but land values will naturally take into account use - a piece of land one side of the road that is in green belt land will be worth a lot less than a piece of land opposite that has planning permission.

== Doublepost prevention - post automatically merged: 9 Aug 2025 ==

1. Tax gambling winnings as income. If you get £50k from employment, or £50k in dividends/rental income, it's taxed. The same should apply to a £50k win on the horses, at the casino or on the National Lottery.

We already do.

It is currently a levy on bookmakers and the like [and there is a current campaign to increase that levy].

The idea of such a levy is to reduce the odds so that the winner is effectively charged without noticing.

 

[JonathanH]

has led to the highest earners not paying the highest marginal rate which is absurd

That is clearly awkward, but given the median pay in the UK is about £37k, the removal of the personal allowance between £100k and some higher number isn't a unreasonable policy.

I note that the media often run stories about the 'scandal' of publicly funded employees earning over £100k, as the kind of threshold that few should pass, but I guess the reality is that around 4% of people in the UK do earn more than that.

I don't see any political party ever being able to remove that feature as it would be giving tax cuts to the well off.

It isn't really clear what to do above £125k where the marginal rate reduces back down to 45% again. For some the disincentive of paying higher tax rates in working fewer hours in the week. This could be seen as a drain on the economy because of lower productivity, but equally it is an opportunity for more people to fulfil these roles.

 

[greatkingrat]

Correct, but unless there is a scandal surrounding NS&I, there will forever be a significant float. EVen accepting that we should only ever compare it with a 1 month treasury bill, 3.6% < 3.75%, so premium bonds are still a cheaper form of borrowing anyway.

You are forgetting the administration costs. It is much more cost effective to sell a few large bonds to pension funds and other financial institutions, than it is to sell lots of small amounts to thousands of small private investors, even if the interest rate is slighty less for premium bonds.

 

[deltic]

As above I agree with a land tax, but am not sure what you mean by "regardless of its use". I assume you mean that all land owners will pay, but land values will naturally take into account use - a piece of land one side of the road that is in green belt land will be worth a lot less than a piece of land opposite that has planning permission.

I mean no exemptions for charities, allotments, farm buildings, roads etc ie all land will have a value assigned to it and taxed on that value.

 

[JonathanH]

I mean no exemptions for charities, allotments, farm buildings, roads etc ie all land will have a value assigned to it and taxed on that value.

What are you going to charge a preserved railway for the land use of its trackbed?

 

[Magdalia]

This discussion is about tax, however it is prudent to point out that there are many ways of running an economy and the idea that in order to achieve our goals we must raise or cut taxes is often presented as the only solution, because we must cut the deficit etc. It's false, and there are alternatives, which other global economies have successfully implemented, and in particular the faster growing economies demonstrate regularly.

But the UK is not a faster growing economy, you are again not comparing like with like.

The UK is a near to zero growth economy, and has been like that since the 2008 financial crash. It has existing debt at almost one year of GDP, the markets charge it very high interest rates to borrow (the 4.6% on 10 year money that you have already mentioned), and it already has a very high interest bill.

In these circumstances, borrowing to fund revenue expenditure is unsustainable. Revenue expenditure, including interest on existing debt, does need to be covered by tax income, not more borrowing.

It is only when the UK gets back to being a faster growing economy, that other options will open up.

 

[35B]

That is clearly awkward, but given the median pay in the UK is about £37k, the removal of the personal allowance between £100k and some higher number isn't an unreasonable policy.

It is if you then acknowledge that income above that higher value is then taxed at a lower rate.

 

[deltic]

What are you going to charge a preserved railway for the land use of its trackbed?

Whatever the land is valued at which may be very low.

 

[JonathanH]

Whatever the land is valued at which may be very low.

It could equally be high, if desirable for residential property. I guess that the value would depend on the approved use for a particular plot of land.

 

[PauloDavesi]

Surely the aim of any government is to have a tax system that is efficient, and collects the minimum amount of revenue needs to provide the essential services the state provides.
The ideal tax system would be fair, to all citizens, be efficient, so not complex and expensive to collecvty, and not have such punitive rates that it allows an industry to develop running schemes to legally reduce an individuals tax liability.
I would be in favour of very severe penalties for individuals and businesses that do not pay their taxes correectly and on time.

 

[Magdalia]

Surely the aim of any government is to have a tax system that is efficient, and collects the minimum amount of revenue needs to provide the essential services the state provides.
The ideal tax system would be fair, to all citizens, be efficient, so not complex and expensive to collecvty, and not have such punitive rates that it allows an industry to develop running schemes to legally reduce an individuals tax liability.
I would be in favour of very severe penalties for individuals and businesses that do not pay their taxes correectly and on time.

No the tax system does not work like that.

How tax works is still best summed up by some 19th century French nobleman at the court of King Louis the Umpteenth. He compared raising tax to plucking a goose: the objective is to get the maximum number of feathers with the minimum amount of hissing.

Recent examples demonstrate that making tax changes that affect a small number of people can produce a lot of hissing: look at VAT on school fees and inheritance tax on farmland. It is why many Chancellors have used fiscal drag, because large amounts of extra tax can be raised without much hissing. Perhaps the largest amount of hissing in my lifetime was the poll tax riots in 1990: council tax is a disastrous tax but it achieved its main objective which was stopping the hissing about the poll tax.

The underlying point of this is that raising more revenue means losers who pay more tax, are worse off as a result, and they make a fuss about it, irrespective of whether the tax system has treated them favourably in the past. The hissing is politically difficult, and Chancellors are much more concerned about that than the theoretical efficiency of the tax system.

But there are also second order effects of changes to the tax system. This is because economic behaviour changes, and it can be seen in, for example, changes in employers' decisions about numbers of employees and wages following the increases in National Insurance and the Minimum Wage in the 2024 budget. Economic forecasters try to quantify these second order effects, but with varying degrees of success. In particular, it really is true that some increases in tax rates can result in a reduction in revenue, because of the changes in economic behaviour that result. The difficulty is that nobody really knows where the tipping point is until they have gone over it.

 

[Tom B]

for example, changes in employers' decisions about numbers of employees and wages following the increases in National Insurance and the Minimum Wage in the 2024 budget.

Reflecting upon this particular bit, employers blaming wages/staffing on the NI/NMW rates.

A couple of years ago they blamed it on the oil price/Ukraine
then before that covid
before that brexit
before that austerity
before that the credit crunch

ad infinitum

There will always be some 'big bad woolf' that employers will point to.

 

[87 027]

I mean no exemptions for charities, allotments, farm buildings, roads etc ie all land will have a value assigned to it and taxed on that value.

I fear suggestions along these lines will kill off various charities if new taxes are imposed on existing income streams (such as membership subscriptions) and assets (land and buildings, maybe bequeathed, possibly with restrictions on charitable use) where the charity cannot increase its cash inflow to meet these additional cash outflow obligations. Preserved railways have been mentioned - and there is a thread on how the big ones are all loss-making since the pandemic.

Like rail fares simplification, while the acme of theoretical perfection sounds attractive, the high level principles need to be translated into more specific examples with actual numbers which go further to shedding more light on impact and laying bare the winners and losers

== Doublepost prevention - post automatically merged: 10 Aug 2025 ==

Reflecting upon this particular bit, employers blaming wages/staffing on the NI/NMW rates.

I am treasurer of a number of different registered charities so I claim 'skin in the game' and my view is the increase in NI has not been beneficial for our financial situation...

 

[Egg Centric]

Marginal effective tax rates should be sorted so they're smooth rather than looking like a city scape. There are several regions where they're particularly nuts:

1. Transitioning off universal credit
2. For parents, the child benefit taper between 60-80k
3. Equally for parents the 100k cliff edge on nurseries
4. 100-120k loss of personal allowance

All of these have horrendous distorting effects which can lead to tax rates in 70-80% region (or technically infinity on the cliff edge) and stop people progressing. (1) is probably most damaging but (4) hits a lot of doctors and makes them work part time (most people on low six figures get around it by contributing to pension instead but this doesn't really make as much sense for a doctor).

The headline rates themselves are not unreasonable imo given the national finances.

 

[Yew]

Not just taxes, but we do this with laws. There's a separate offence now for assaulting an emergency worker. There's calls for an extra offence to be created of assaulting a retail worker. At what point do we roll all this back and say actually you know, assaulting anybody is bad, let's leave it at that?

But adding a law gets good headlines, and is much cheaper than actual enforcement.

== Doublepost prevention - post automatically merged: 11 Aug 2025 ==

Unfortunately it is not easy to make use of land through housing development. I own a plot of land which would accommodate a dozen houses. But the local authority will not grant planning permission. Should I be taxed for the fact that I use that land merely for grazing horses?

Reforming planning permission rules would be a good one. Too many special interest groups have effective vetoes (often with competing demands) on development, rather than being involved in an advisory capacity.

== Doublepost prevention - post automatically merged: 11 Aug 2025 ==

All of these have horrendous distorting effects which can lead to tax rates in 70-80% region (or technically infinity on the cliff edge) and stop people progressing. (1) is probably most damaging but (4) hits a lot of doctors and makes them work part time (most people on low six figures get around it by contributing to pension instead but this doesn't really make as much sense for a doctor).

In theory, I'm not against disincentivising work for very high earners, as then the high-paid labour demand will be spread across more people. For example, (using simple numbers) instead of three people at 120k for a 40-hour week, you might have four people at 90k for a 30-hour week. However, this would need to be matched with the supply of people able to do those jobs. And similarly balanced for roles where sometimes doing extra hours or shifts are not always optional, so a person doesn't have the ability to control their income.

 

[martin butler]

My view is that tax avoidance should be the number one priority first, and make it financially not worth trying to cheat everyone else who is paying their fair share, by having very harsh penalties, late paying, also should be charged a punitive interest rate, unless there are valid reasons,

Firms should not be able to set up in the UK, and pay no tax on their earnings in the UK, special arrangements should be made for the non-profit sector, where they are exempt from tax,

I would see where the system can be simplified, possibly looking at removing tax graduation bands, have one tax band, set at say 10 per cent, that everyone pays, on your entire earnings, based on the previous year's earnings, and make up the difference by increasing VAT and extending it, instead of 20 % put it up to 30% the idea being most people will have more to spend, and they will spend it, the richer in society tend not to spend their tax cuts, or invest them, but hold on to them ,

I would cap utilities to inflation, and nationalise water,

 

[35B]

My view is that tax avoidance should be the number one priority first, and make it financially not worth trying to cheat everyone else who is paying their fair share, by having very harsh penalties, late paying, also should be charged a punitive interest rate, unless there are valid reasons,

You may want to look at the coverage of people who’ve been charged penalties by HMRC before going down that road. Tax isn’t necessarily straightforward, especially for those who have previously done everything through PAYE, and there’s a big risk of getting things wrong. I consider myself intelligent and well informed, but doing my Self Assessment return always induces a cold sweat as I realise how little I really know, and that I don’t understand the full implications of the questions.

Firms should not be able to set up in the UK, and pay no tax on their earnings in the UK, special arrangements should be made for the non-profit sector, where they are exempt from tax,

Which tax/taxes are you talking about? And what does that mean for companies that trade abroad?

I would see where the system can be simplified, possibly looking at removing tax graduation bands, have one tax band, set at say 10 per cent, that everyone pays, on your entire earnings, based on the previous year's earnings, and make up the difference by increasing VAT and extending it, instead of 20 % put it up to 30% the idea being most people will have more to spend, and they will spend it, the richer in society tend not to spend their tax cuts, or invest them, but hold on to them ,

So you’d increase the tax being paid by people on benefits by 50%? And when someone retires, you’d tax them based on their income in the year before retirement? Please, please, look up the idea of a tax account and how tax rates actually work.

I would cap utilities to inflation, and nationalise water,

And when utility costs rise by more than inflation? Inflation is only an average; by definition some prices rise by more and some less. If you set a cap, you guarantee that prices will rise by that cap - and that costs will also be harder to control. Just look at rail fares or student fees for an example of how a “cap” becomes a floor.

 

[Magdalia]

I would see where the system can be simplified, possibly looking at removing tax graduation bands, have one tax band, set at say 10 per cent, that everyone pays, on your entire earnings, based on the previous year's earnings, and make up the difference by increasing VAT and extending it, instead of 20 % put it up to 30% the idea being most people will have more to spend, and they will spend it, the richer in society tend not to spend their tax cuts, or invest them, but hold on to them ,

Whatever the theoretical merits of this, it is impossible to implement practically. You have plucked out 10% as the rate for a single tax band. How have you decided that? If it is too low, what happens? If it is too high, what happens?

And, even if you get the rate (nearly) right, there will be losers, lots of them.

I would cap utilities to inflation, and nationalise water,

The government has been capping energy prices for a while now. It is a significant contribution to the recent increases in government debt.

Nationalising water costs money, what are you going to stop doing to release the funds to pay for it?

 

[Richardr]

My view is that tax avoidance should be the number one priority first, and make it financially not worth trying to cheat everyone else who is paying their fair share, by having very harsh penalties, late paying, also should be charged a punitive interest rate, unless there are valid reasons,

Firms should not be able to set up in the UK, and pay no tax on their earnings in the UK, special arrangements should be made for the non-profit sector, where they are exempt from tax,

I would see where the system can be simplified, possibly looking at removing tax graduation bands, have one tax band, set at say 10 per cent, that everyone pays, on your entire earnings, based on the previous year's earnings, and make up the difference by increasing VAT and extending it, instead of 20 % put it up to 30% the idea being most people will have more to spend, and they will spend it, the richer in society tend not to spend their tax cuts, or invest them, but hold on to them ,

I would cap utilities to inflation, and nationalise water,

Ignoring the rates you propose, I suggest for most people income tax under PAYE is as simple a tax as we have. To remove this year's earnings and base it on a previous year makes it horrendously more complex including:

1. someone who retires pays based on last year - that will be popular
2. Businesses need a record of last year's earnings - many issues, but what about those who move job? They also need to know all of an emplyees other income, e.g interest on their bank accounts, gains on sale of investments, etc., etc.
3. Cashflow - say someone receives a pay-off or a large bonus one year. They will be paying the tax on that the following year, not when they receive the income.

The latest figures on tax receipts are that taxes on income raise £487.4 billion, VAT £171.1 billion. Good luck with reducing the former drastically and increasing the latter to make up the difference.

Ignoring your idea that taxes should be lowered on the rich - the final suggestion of price capping utilities and nationalizing water. The real issue with our water has been known about for decades, and is the same as most other European countries - see the River Seine before the Paris Olympics. We built the drainage as one system which takes both sewage and rain water. Following a lot of the later, the system as built can't cope. Sewage is fairly constant and with just that the system is built to cope. The answer is to separate the two - rainwater can go straight into the sea with no issues, after all that is where a majority of it goes anyway. Because, both when it was publicly held and now when it is privately held, governments have considered their main objective as keeping the price low, then there is no investment to sort this out. Large investment is needed, but that will not happen unless someone pays for it, and the ownership hasn't in the past, or likely in the future, made any difference to that and it hasn't happened. The cracks are papered over and the government have someone to blame.

 

[martin butler]

But how else do you work out what tax someone should pay, I Suggested basing it on a known amount, so that it can be worked out accurately, and based on previous earnings over the last 12 months, seemed a fair idea,

Taxation is IMHO more complicated than need be, up to a certain point you pay a set amount, then it becomes very hard to understand how the various bands affect what you actually pay, if you're a high earner, you might be paying over several bands simultaneously, but what is the actually percentage of tax paid, overall? is it actually lower than someone would pay on PAYE?

Benefits etc, child allowance, couldn't these be disregarded for taxation purposes?

Water and Utilities, everyone now is paying more for a poorer service,, My stance on Water is that the companies need bringing back into public ownership, and converted into not for profit companies, with all receipts being plowed back into the industry, not in shareholder profits, short term, it will need investment, and most people will accept a small increase in government debt for infrastructure work, that of course, will provide employment and those employed will be paying tax,

 

[Bletchleyite]

But how else do you work out what tax someone should pay

It's worked out on a rolling basis from what you are paid each pay period. It's not hard and it works fine.

 

[Egg Centric]

In theory, I'm not against disincentivising work for very high earners, as then the high-paid labour demand will be spread across more people. For example, (using simple numbers) instead of three people at 120k for a 40-hour week, you might have four people at 90k for a 30-hour week. However, this would need to be matched with the supply of people able to do those jobs.

Which is not happening for a lot of jobs around that tax bracket (such as doctors, developers, etc) as there aren't the staff to go around as it is.

 

[Richardr]

Taxation is IMHO more complicated than need be, up to a certain point you pay a set amount, then it becomes very hard to understand how the various bands affect what you actually pay, if you're a high earner, you might be paying over several bands simultaneously, but what is the actually percentage of tax paid, overall? is it actually lower than someone would pay on PAYE?

Of course tax should be simpler, as there are distortions in income tax, but it is the simplest of all taxes for employees who are those who pay it, and there is no reason to complicate it further in the ways you suggest.

However, I'm not sure at all what you mean here. High earners are on PAYE the same as low earners. How would there be any difference?

 

[Tetchytyke]

In general I'd agree that the tax should only be on the income generated from those assets. As Dan Neidle shows, otherwise you end up with people paying more tax than they earn from the asset.

However I think we do need to look much more closely at how we are defining income.

If someone is land-banking then they won't be getting an income from the land. However we can quite easily apply a deemed income to any land held, and tax on the basis of that deemed income. This is precisely what happens when you claim welfare benefits- if you have assets you are deemed to have an income from them, and your benefit is calculated on the basis that you are drawing down this income.

I'd also disallow the costs of finance when calculating the income. We started down this road when private landlords could no longer offset the cost of any mortgage interest against income from rental properties. This should be expanded further.

Missed that a new thread had started, so I've copied my other post across.