“These revenues can be used to recalibrate the tax system, reduce poverty, strengthen public services and support long-term social and economic development.”
Prem Sikka wrote a piece for the Socialist Campaign Group’s 2026 pamphlet ‘The Socialist Policies We Need’. You can read it in full below.
Successive UK governments have imposed fiscal rules that have constrained public borrowing.
This has placed greater emphasis on taxation as a major instrument for funding public investment and tackling economic and social problems.
Yet the UK’s tax system contains numerous anomalies and regressive reliefs that disproportionately benefit wealth over work and mean that significant revenues go uncollected.
Below are some examples of these and a range of options for tax, fiscal and legal reforms that could raise billions of pounds each year without increasing the basic rates of income tax or National Insurance.
The revenues can be used to recalibrate the tax system, reduce poverty, strengthen public services and support long-term social and economic development.
- Wages are taxed at marginal rates of 20%–45%. Earners also pay National Insurance. Capital gains above £3,000 are mostly taxed at marginal rates of 18%- 24%. By taxing capital gains at the same rates as wages, around £12bn – £14bn could be raised. More could be raised if National Insurance were also levied.
- Dividends above £500 are taxed at marginal rates of 8.75%, 33.75%, and 39.35%. Bringing dividend taxes in line with income tax rates could raise £6 billion a year. The figure would be higher if National Insurance were also charged.
- Tax relief on employer and employee pension contributions in 2024-25 was £83.9bn. 14% of the relief benefited 1.1m additional-rate (45%) taxpayers, 57% benefited 6.6m higher-rate (40%) taxpayers and 29% benefited 30.4m basic-rate (20%) taxpayers. By restricting tax relief to the 20% rate for all, the government would have an additional £14.5bn.
- Dividends to foreign investors are paid without deducting tax at source. In principle, foreign investors would pay tax at their place of domicile but dividends may be paid to entities in offshore tax havens which do not levy tax on foreign incomes. Subject to tax treaties, the US, Australia and Sweden have a dividend withholding tax rate of 30%, Italy has a rate of 26%, while Germany, Canada and France have rates of 25%. The UK should follow suit. Each £100bn of dividends paid to foreign investors could yield £20bn in tax revenues when taxed at 20%.
- Corporate employers pay National Insurance contributions on directors’ salaries. In limited liability partnerships (LLPs) employers pay National Insurance on employee earnings, just like companies. However, partners receive a share of profit instead of a salary and are treated as self-employed. Self-employment status means LLPs do not pay employers’ National Insurance (ENI) on partners’ share of profits. LLPs dodge £150,000 ENI per £1m profit shared by partners. Big Four law firms alone reportedly avoided paying £4bn of ENI. There is considerable potential to collect additional ENI from lawyers, accountants, dentists, surveyors and architects trading through LLPs.
- A 1% tax on share buybacks by quoted companies could on average raise £225m a year. Recently, companies like BP and Shell have handed billions to shareholders through buybacks. If share buybacks for Shell and BP were subjected to a 25% tax rate, another £11bn could have been raised.
- By charging VAT at the standard rate (20%) on private healthcare insurance, the government could raise around £2bn a year.
- A Financial Transactions Tax on the purchase and sale of financial instruments like shares, bonds, and derivatives could raise £5bn a year.
- A 2% tax on wealth above £10m could raise £24bn a year.
- A windfall tax on the 2026 profits of the UK’s four biggest banks could raise £19bn.
- In England, a house worth £320,000 falls into the same council tax band as a property worth £32m. Additional council tax bands can raise further revenues.
- Over 1,180 tax reliefs worth billions are given to individuals and corporations, but only 380 have been costed. Little is known about the economic benefits of most reliefs. Many are abused. A large number of tax reliefs for movies, video games and patents often benefit foreign companies. A thorough review can save billions.
- Due to tax reliefs, very few companies pay the main 25% rate of corporation tax. The effective rate is about 10% less. A 1% increase in the main rate can generate £3.6bn. Similar effects can be achieved by redesigning tax reliefs, such as those relating to the Patent Box, R&D, creative industries, and increasing the effective corporation tax rate.
- Most financial services are exempt from VAT. Around £8.7bn a year could be raised by charging VAT at the standard rate.
- Currently, 8% National Insurance is levied on incomes between £12,570 and £50,270, and 2% on incomes beyond that. More than £12bn a year can be raised by extending the 8% rate to all income. Alternatively, significant amounts can be raised by a graduated rate e.g. 2% on incomes between £50,271 and £100,000; 3% on income between £100,001 and £150,000, and a higher rate on incomes above that.
- A 15% surcharge on investment income above £5,000 could raise around £18 billion a year.
- In 2024-25, HMRC failed to collect £59.2bn of taxes, which is nearly £500bn since 2010. HMRC underestimates tax avoidance by wealthy individuals. It does not produce an estimate of taxes lost to offshore excursions. Some £12.8bn lost through profit shifting by multinationals is not included in the HMRC estimate. Billions can be raised by tackling tax abuse and the industry behind it.
- HMRC is an unsecured creditor for business taxes (such as corporation tax and capital gains tax) owed by businesses and loses billions when entities enter bankruptcy. The losses form a significant part of the £7.2bn written off in 2024-25 and £12.8bn in 2025-26. Restoration of the pre-2002 preferential creditor status can raise billions.
- Since 2006, the Bank of England has paid interest on central bank reserve deposits to commercial banks. Central bank reserves are deposits held by commercial banks at the Bank of England and are used to settle payments between banks and manage interest rates through tools such as quantitative easing. The interest payments accelerated in 2009 as quantitative easing took hold. As interest rates rose, payments to commercial banks increased. The EU had similar arrangements but in 2023 virtually eliminated the practice, saving about £5.2 billion a year. The UK has paid £38.23bn in 2023, £36.33bn in 2024 and £25.9bn in 2025. Reforming these arrangements could release billions for social and economic development.
- We hope this contributes to a debate across the Labour Party, trade unions and the wider movement about the political programme needed to deliver the change people voted for, to build a better future for our communities and to prevent the rise of a Trump-style government here in Britain.
- You can read ‘The Socialist Policies We Need’ in full here.
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