Part 11: The Future of UK Tax Policy | The Long View with Jon Rose, Adam Lawrence & Roger Martin-Fagg

Part 11 of The Long View Podcast Episode 1. The Full Podcast will be posted on 05 June 2026.

The UK tax system is under pressure from multiple directions simultaneously – an ageing population, a rising dependency ratio, stagnant growth in income tax receipts, and a political environment in which every serious lever feels radioactive to touch. Jon Rose, Adam Lawrence and Roger Martin-Fagg worked through the options with unusual directness: what is actually likely to change, what makes economic sense, and what it means for anyone trying to plan ahead.

Roger’s opening position was that the UK has reached the limit of taxing incomes in their current structure. The 40% rate kicks in far too early – dragging in people who are by no means high earners in any meaningful sense – and fiscal drag has been quietly extending its reach year after year without a single headline-grabbing decision being required.

His expectation is that a new Chancellor will restructure the bands: introducing intermediate rates of 32% and 34%, with the 40% rate not applying until income reaches £100,000 or more. Counterintuitively, Roger’s view is that the overall tax yield would likely be higher under this structure – better rates of compliance, reduced avoidance incentives, and a broader productive base paying slightly less but staying in the system more fully.

Jon’s observation was straightforward: fiscal drag cannot be allowed to continue indefinitely. Something will have to move on income tax. The question is when and how.

Adam made the case for a luxury VAT rate – a higher band of VAT applied to premium goods and services – as a tax that is both economically coherent and politically communicable. The mechanism is clean: people who spend heavily on luxury goods pay more, and the revenue is visibly directed toward public priorities. For a left-leaning government looking for a narrative that resonates, it is, as Adam put it, a beautiful story to tell.

Roger added the behavioural dimension: in the luxury goods market, higher prices can actually increase demand by signalling exclusivity. A Veblen good becomes more desirable as it becomes more expensive. A luxury VAT rate is therefore less likely to distort behaviour – and suppress revenue – than conventional economic models would suggest.

Both agreed that consumption taxes represent the most viable direction for future revenue growth. The dependency ratio is rising, longevity is increasing, and the tax base needs to expand. Taxing spending – particularly discretionary high-end spending – is a more politically and economically stable route than continuing to squeeze income.

KEY POINT: The direction of travel on UK taxation is away from income and toward consumption. For those planning their long-term finances, understanding where the next set of tax changes is likely to land – and structuring accordingly – is increasingly important.

Roger raised the prospect of inheritance tax being charged at the individual’s marginal income tax rate rather than the flat 40% that applies today. For higher earners, that could mean a rate of 45%. The planning implications are significant – and the point Adam made in response was equally important: there is still considerable scope to plan around inheritance tax, and the window to do so may be narrowing.

On capital gains tax, the conversation was more cautious. Aligning CGT with income tax rates has been discussed for years, but the near-term problem is timing: such a change typically suppresses disposals in the years immediately following its introduction, which reduces revenue at exactly the moment a government needs it. That constraint makes a full alignment less likely in the short term – though the direction of travel remains the same.

Land value tax came up as the theoretically obvious solution – you cannot move land, which makes it almost impossible to avoid – but Roger’s assessment was characteristically pragmatic: it should happen, it probably won’t, because too many people in Westminster own land.

Adam’s sharpest point concerned the gap between what large multinationals earn in the UK and what they pay in tax. With intellectual property housed offshore and revenue routing structures designed to minimise UK exposure, companies generating enormous profits from British consumers pay a fraction of what a proportionate tax contribution would look like.

His proposal: tax turnover rather than declared profit, and increase the digital services tax rate meaningfully. At 4% of UK turnover rather than 2%, the revenue implications would be substantial – and unlike wealth taxes or CGT changes, it does not risk capital flight or behavioural distortion in the domestic economy. The money is already here. It just needs to be captured more effectively.

The final thread in the conversation – and arguably the most immediately practical for anyone listening – was HMRC’s use of artificial intelligence to close the tax gap.

Roger flagged it directly: HMRC is going to go big on AI enforcement, and a significant number of people are going to receive letters asking whether there is anything they would like to declare. Adam illustrated the mechanism with a precise and uncomfortable example: cross-referencing land registry data with self-assessment returns would, within seconds, identify individuals holding multiple properties with no declared rental income. That conversation with HMRC is not one anyone wants to have.

The practical message is clear. If there are historic tax matters that have not been fully addressed, the window to resolve them proactively – on your terms rather than HMRC’s – is open now, but it will not remain open indefinitely. An amnesty scheme is currently in place. The time to use it is before the AI letter arrives, not after.