Tax reform wish list: Britain needs more than another round of tinkering

The question on 28 October should not simply be whether particular taxes rise or fall. It should be whether the UK is becoming a simpler, more predictable and internationally competitive place in which to invest.

That is where our tax reform wish list begins.

Reform should be guided by neutrality as well as simplicity. The structure of taxation can matter as much as the overall burden: similar income and activity should generally be taxed consistently, marginal rates should not jump unpredictably, and reliefs should have a clear policy purpose. Growth is weakened when revenue is raised through distortive transaction taxes, arbitrary boundaries and narrow exemptions, or when one tax break merely compensates for a distortion elsewhere. Reform should ask not only how much is raised, but whether the tax mix supports work, investment and the efficient use of capital.

Britain’s difficulty is not necessarily that it lacks attractive features. It has a respected legal system, deep financial markets, strong professional services and access to talent. But its tax system has become increasingly complicated, with overlapping thresholds, withdrawn allowances and frequent changes making it harder for individuals to understand what they will pay.

For internationally mobile individuals and investors, uncertainty can be especially influential. They are rarely looking only at the tax bill for the coming year. They may be deciding where to base a family, develop a business, employ people or hold assets over several decades. They therefore need to know not just what the rules are today, but whether those rules are likely to remain broadly stable.

The changes affecting internationally mobile individuals and investors illustrate the point. Since 6 April 2025, the remittance basis has been replaced by the Foreign Income and Gains regime. Qualifying new UK residents can claim relief on eligible overseas income and gains during their first four years of UK residence, provided they were non-UK resident for the previous ten consecutive tax years. After that four-year period, UK residents are generally taxed on their worldwide income and gains.

The objective now should be to give that regime time to settle and to provide clear guidance about how it operates. Constant adjustment risks making the UK appear unpredictable when it is competing with jurisdictions offering internationally mobile individuals and investors greater certainty. A published tax roadmap, meaningful consultation and sensible transitional arrangements would help them plan with greater confidence.

Domestic cliff edges also need attention. Above £100,000, the Personal Allowance is withdrawn by £1 for every £2 of adjusted net income, creating an effective marginal tax rate of 60% for many taxpayers until the allowance disappears at £125,140. Working parents can also lose Tax-Free Childcare where either partner expects adjusted net income above £100,000, meaning that a pay rise or bonus may deliver little benefit—or leave the family worse off.

Smoother tapers would reduce distortions to work, remuneration and pension decisions. More broadly, reform should remove cliff edges rather than add reliefs to offset them, favouring a broader base, fewer exceptions and gradual withdrawal mechanisms.

Inheritance tax also illustrates the value of reform that is easy to explain. The Conservatives have proposed removing the family home from inheritance tax where it passes to children or grandchildren, while increasing the individual nil-rate band to £500,000. Whatever the political prospects of that proposal, the current combination of overlapping nil-rate bands, qualifying-residence conditions and tapering can make passing on a home unnecessarily complex. A simpler family-home exemption would be more readily understood, although its design would need to address fairness between homeowners and those whose wealth is held in other assets.

Property taxation needs to be considered in the round. High SDLT rates, combined with elevated borrowing costs and inflation, can deter people from moving, downsizing or relocating for work, reducing labour mobility and transactions across the wider housing economy. Recent shifts in activity around SDLT threshold changes show that transaction taxes alter behaviour and can make a constrained market less fluid. As council tax still relies on historic valuations, reform should consider gradually shifting the balance from taxing moves towards a more rational recurrent property tax, with protection for asset-rich but income-poor households.

The same principle of neutrality applies to the taxation of work. Income tax and National Insurance merit longer-term alignment because different treatment of employees, the self-employed and forms of remuneration can distort working and business structures. A more neutral and transparent system should be phased carefully and recognise genuine differences in employment status.

Investment taxes deserve similar scrutiny. Stamp Duty and Stamp Duty Reserve Tax impose a 0.5% charge on the purchase of many UK shares. That may look modest, particularly beside headline rates of income tax or SDLT, but it is paid upfront whether the investment succeeds or fails and can be incurred repeatedly as portfolios turn over. In globally competitive capital markets, that friction matters. Reducing or abolishing these stamp taxes could improve liquidity, support valuations and make British companies more attractive to domestic and international investors. The test should be whether reform attracts genuinely additional capital and strengthens the UK market, rather than merely rewarding transactions that would have happened anyway.

The same pro-business lens should be applied to capital gains tax. Entrepreneurs’ Relief once offered a 10% rate on up to £10 million of qualifying lifetime gains. Its successor, Business Asset Disposal Relief, now applies to only £1 million of lifetime gains and, from 6 April 2026, at an 18% rate. That is a substantial erosion of the incentive originally offered to people who build and realise value in a business. A credible growth strategy should reconsider whether the current relief is sufficiently meaningful to influence entrepreneurial risk-taking, succession and the decision to establish and scale a business in the UK.

VAT is another everyday example of avoidable complexity. Disputes over whether similar goods and services are standard-rated, reduced-rated or zero-rated consume resources without a clear economic benefit. Exemptions and reduced rates should be retained only where they remain justified, with transparent support for those affected by reform.

Finally, reform must include tax administration. Taxpayers, businesses and investors need accessible guidance and timely answers where significant decisions depend on the tax treatment. Better digital services and stronger technical support from HM Revenue & Customs may not provide a dramatic Budget headline, but they are central to confidence in the system.

Fundamental reform is difficult and cannot be delivered in a single fiscal event. But the UK needs more than another collection of disconnected measures: it needs a clear direction of travel towards a system that is simpler, more neutral and more predictable. Competitiveness is not just about lower rates; it is about rules that people can understand and rely on when making long-term decisions. That would be a Budget announcement worth investing in.

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