Summary

• The Government must find ways to raise between £20-40 billion, against the headwinds of low growth, political pressures and rising interest rates. 
• Fiscal ingenuity is therefore essential for delivering on this Government’s missions.
• This paper proposes ten politically uncostly policies which, combined, would raise around £4.21 billion each year. 

The proposals are:

1. Remove the Vehicle Excise Duty exemption for vehicles manufactured at least 40 years ago – raising £170m
2. Abolish the empty rates exemption for listed buildings – raising £460m
3. Eliminate the starting rate for savings – raising £400m
4. Remove the pension tax free lump sum entitlement from new contributions and accumulation – raising £10m in year one, rising significantly over time
5. Abolish the Patent Box – raising £1.45 billion
6. Reduce the effective tax relief rate for audio-visual expenditure credits – raising £375m
7. Place sensible limits on employee share schemes – raising £400m
8. Reduce the Capital Gains Tax allowance – raising £125 million 
9. Ban large cash transactions – raising £770 million and tackling tax avoidance
10. Enforce foreign companies’ disclosure of beneficial ownership – raising £50 million and tackling tax avoidance 

Introduction

The UK’s fiscal situation is not so much one policy challenge among many as it is a defining theme of this government’s difficulties. From welfare reform to winter fuel payments, the government has faced its harshest headwinds when trying to make savings. Finding funds will, to a greater or lesser extent, dictate the pace of progress on the Government’s missions. In the meantime, every step the state takes is in the shadow of an annual interest bill of more than £100 billion, thanks in part to borrowing costs that are higher than those faced by any other G7 country.

One of the many reasons economic growth is so critical is precisely because of the contribution it could make to the country’s fiscal future. Yet even in the most optimistic scenarios, reviving economic growth will not immediately turn around Britain’s public finances. Fiscal ingenuity is therefore essential to ensure the sustainability of public finances and enable the reforms that can deliver growth in the medium to long-term. Removing the breathing space that fiscal stability provides would risk shifting political attention away from the imperative to deliver growth.

Any serious proposal to raise revenue has to account for the obstacles before it, whether in the form of backbenchers or bond markets. There is also a crying need for more innovation in fiscal policy. For all the talk of Britain’s growing debt, there is little discussion of how tax reliefs can be reformed in politically realistic ways, where inventive policy may be able to target specific forms of tax evasion, or how the government can generally think outside the box to balance the budget.

Ways to Raise

This paper proposes ten politically palatable policies which, combined, would raise around £4.21 billion each year. While this represents a modest contribution to the overall fiscal picture, this sum is, for context, four and a half times larger than the £1 billion cost of restoring winter fuel payment to most pensioners.

The significance of the policies proposed here goes beyond the amount they might raise in the next fiscal year. Some of the proposed measures will produce growing savings over time, acting as a welcome counterweight to the many trends pushing in the opposite direction. The paper also references sensible proposals already in the ether which could raise additional sums. Each proposed policy brings other benefits too. Abolishing exemptions and reliefs helps to simplify the tax system. Targeting common forms of tax evasion contributes to the fight against crime and corruption.

Far from a complete list, the policies proposed here are examples of the myriad ways in which more intricate and innovative policy could make a major contribution to the UK’s fiscal outlook. The Mirrlees Review concluded that the UK’s tax system is inefficient and inequitable, and that it requires considerable reform to make it less distortionary and more progressive. This set of proposals is a small step towards beginning that process of simplification. We (the Centre for British Progress) will continue to build on that premise in future work, outlining how the UK can use more original thinking to confront the fiscal challenge in ways that are politically realistic and consonant with this Government’s missions. 

List of proposals

Summary table

1. Remove the Vehicle Excise Duty exemption for classic cars

Amount raised over time: £170m in 2026-27, rising to £200m by 2029-30

Who is affected: Owners of 297,480 classic cars

Policy Background

Vehicle Excise Duty (VED) is a tax in the UK that generally increases in proportion to a car’s CO₂ emissions and price. However, an obscure tax relief means that cars which are at least 40 years old are totally exempt from the levy, regardless of how polluting or pricey they may be.

The story goes back to 1996, when then-Chancellor Ken Clarke introduced a relief providing that any vehicle manufactured at least 25 years earlier would be exempt from VED. At the time, the move took even its beneficiaries by surprise. In 1998, the Labour government froze the cut-off date at 1 January 1973, with the aim of gradually phasing out the exemption. However, in the 2014 budget – in the midst of austerity – the government reintroduced a rolling exemption which applies to all cars that are at least 40 years old.

When the government introduced this policy in 2014, they offered two sparse sentences in explanation: “The VED exemption is intended to support classic vehicle [sic], which the Government considers are an important part of the nation’s historical heritage. According to research by the Historic Vehicle Research Institute and the Federation of British Historic Vehicles Clubs, in their publication The British Historic Vehicle Movement: A £4 Billion Hobby, the historic car industry employs about 28,000 people in the UK.”

This is a bizarre statement in several ways. First, classic cars with some commercial use are not entitled to the exemption, while a classic car kept in a museum or on private grounds would not be subject to VED, as the tax only applies to vehicles on the road. This makes the rationale for the exemption – supporting the classic car industry – somewhat incoherent. 

Above all, the Government has never commissioned public work on, or made any serious case for, a subsidy for the sector, and for good reason: it would be an extraordinarily difficult case to make. We wish every success for the classic car industry, but there is no compelling case for providing a tax break to this sector over any other in the UK. As of April 2025, even electric vehicles are subject to VED.

Data released in 2024 revealed that there were 338,697 cars which were at least forty years old, although 41,217 were declared to be off road, leaving 297,480 vehicles that would be subject to VED if the relief were abolished. HMRC’s estimates indicate that each vehicle would be subject to VED of around £520. While there is no comprehensive data on the background of these vehicles’ owners, a 2022 report from a specialist historic vehicle insurer provided some insight by reviewing its client base of 83,082 individuals. The report noted that around 80% were in their 50s or older and 91% were male, adding that it is “hardly surprising that the more affluent and more densely populated regions of the UK are typically where classic vehicle ownership is higher”

Policy Options

We propose fully removing the classic car VED exemption. HMRC estimates that the exemption cost the Exchequer £155 million in the last fiscal year Over the previous four years, the sum has increased by £10-15 million each year. If similar trends continue, the cost could reach £175 million in fiscal year 2026-27, and around £200 million per annum by the final year of this Parliament.

These figures from HMRC do not account for behavioural responses which could reduce the revenue from abolishing the relief. However, there is little scope for avoiding the tax besides selling the car (and potentially replacing it with a new, VED-paying car), or declaring that the car is off road through a Statutory Off Road Notification (SORN). 

The fact that so many historic car owners have already filed a SORN might indicate that the remaining vehicle owners place some value on being able to drive their vehicle, and would be willing to pay VED. Previous research indicates that levying VED on these cars would likely only reduce rates of car ownership by a little less than 1%. On the basis of these figures, we round down the estimated savings for 2026-27 to £170 million.

As an alternative to abolishing the relief, the government could make more modest savings by freezing the cut-off date in the way the last Labour government did. This would mean freezing the threshold at its current date of 1 January 1985, saving approximately an additional £10 million with each passing year.

Revenue Forecasts:

2. Abolish the Empty Rates Exemption for Listed Buildings

Amount raised over time: £460m in 2026-27

Who is affected: Owners of ~142,000 commercial listed buildings

Policy Background

In a contested field, one of the UK’s most peculiar tax exemptions allows owners of listed buildings not to pay business rates on empty buildings. This turns out to be a huge number of buildings: there are around 142,000 businesses operating in listed buildings in England.

The UK could learn from the Scottish Government, who, in 2016, commissioned the Barclay Review on business rates, which recommended reducing the generosity of the empty rates exemption for listed properties (p.77). This ultimately led to the devolution of decisions around empty rates reliefs to local councils in Scotland in April 2023. By 2024, local authorities from Edinburgh to Aberdeen had used their new powers to remove the empty rates exemption for listed buildings.

The Scottish Government’s impact assessment of removing the exemption for listed buildings struggled to find strong arguments against making the change. One concern was that removing the exemption could motivate some property owners to destroy the property to avoid paying the rates – even though such an act could lead to fines of up to £20,000 and even imprisonment. 

A second concern was that removing the exemption could discourage developers from regenerating listed buildings by imposing an additional cost. This is also a concern without substance. A 2017 UK Supreme Court decision established that where a building is undergoing substantial refurbishment, it is effectively exempt from business rates Indeed, applying empty rates could have the opposite effect: it encourages owners to make productive use of their assets, or sell up. 

Policy Options

The Barclay Review recommended limiting the relief such that listed buildings would only be exempt from empty rates for two years. Ultimately, the Scottish Government chose to devolve the question to local authorities. Many have eliminated the relief in its entirety. Given the financial challenges facing local authorities in the rest of the UK, we can assume that many councils would want to adopt a similar approach. 

The government estimates that the cost of the listed buildings relief will reach £464 million in 2025-26. Revenue raised by its abolition may be marginally less than that due to business rates avoidance, which is estimated to equal 1% of business rates revenue. 

The savings made by empowering local authorities to eliminate the exemption would directly saccrue to local authorities rather than central government. However, given the extent of central government support to local councils – with an overall funding settlement of more than £69 billion in 2025-26 – savings for local authorities should be considered savings for the British taxpayer.

Revenue Forecasts:

3. Eliminate the Starting Rate for Savings

Amount raised: £400m in 2026-27

Who is affected: ~635,000 taxpayers who currently benefit from the starting rate for savings

Policy Background

For most forms of income, the first pound you earn is not taxed. For example, every individual in the UK can earn £12,570 before income tax kicks in.

There are two rationales for this. The first is to help those on lower incomes: £12,570 is not really enough to live on, so it is better to let workers have a tax free allowance, rather than collect and redistribute. 

The second rationale for a tax-free allowance is to save people the hassle of having to pay tax on small sums. For example, if you earn less than £500 from dividends, you do not have to pay any tax on your dividends income. For both the Government and the individual, it is not worth the administrative hassle of taxing this income. 

The amount you can earn in savings before having to pay tax depends on your income tax bracket. 

1. For anyone earning under £50,270 per annum, there is a £1000 personal savings allowance. This is the amount you can earn from savings (i.e. interest payments) before being taxed.
2. There is also a £5000 starting rate for savings for those with other income of less than £12,570. This £5000 allowance is reduced pound for pound as your other income rises above £12,570 until it disappears at an income level of £17,570, leaving you with just the £1000 personal savings allowance.

There are some obvious flaws in this system. For someone to earn £6000 in savings income, even with interest rates as high as 5%, they would need to have £120,000 sitting in a bank earning interest for a year. When interest rates were around 2%, they would have needed £300,000. To be subject to tax, this pot of money would also need to be outside ISAs – to which one can add £20,000 per year. 

Who sits on hundreds of thousands of pounds in cash savings while earning less than £12,570 a year? Such individuals are unlikely to be in desperate need of support from the tax system, but instead are very often the spouse or child of a wealthy individual.

The policy failure here is not accounting for there being two types of people who have little to no income: the very poor and the very wealthy. The latter category includes those who are so wealthy they no longer need to work, as well as spouses and adult children whose financial affairs can be structured precisely to benefit from tax quirks like the £5000 starter rate for savings. The IFS picked up on precisely this point, noting that “the policy intent of the starting rate is unclear” and “there must be a likelihood that the benefit is mainly received by wealthier households.” 

This particular tax relief was born in the Osborne budget of 2014. Prior to that, there had been a 10% tax rate applied to the first £2880 of savings income.

Policy Options

We propose abolishing the £5000 starting rate for savings, leaving in place the £1000 savings allowance which already exists for everyone earning up to £50,270. The IFS estimates that this could raise £300-600 million. To account for the unknown scale of the potential behavioural response to this measure, this paper takes a figure towards the lower end of that range for its estimate, assuming annual savings of £400 million.

Previous governments have chosen to reduce allowances for capital gains and dividends in stages. A similar approach could be taken here, reducing the starting rate for savings by £1000 or £2000 each year until it disappears.

Revenue Forecasts:

4. Remove Pension Tax Free Lump Sum Entitlement From Future Contributions & Accumulation

Amount raised over time: £60m in 2029-30

Who is affected: Anyone making new contributions to pension schemes.

Policy Background

A large proportion of tax relief is directed towards supplementing pensions, with the aim of ensuring everyone has what they need to sustain them in retirement. This was the inspiration for the state pension, a raft of supportive tax reliefs and more recent innovations like auto-enrolment.

One of the most generous features of this system is the licence to invest up to £60,000 of pre-tax income in a pension each year – and then watch it grow, tax-free. With the removal of the lifetime allowance in 2023, this set of tax breaks has cleared the way for high earners to accumulate pension savings worth millions of pounds tax-free.

The cherry on top, however, is the lump sum allowance (LSA), which allows pensioners to withdraw 25% of their nest egg completely tax-free, up to a limit of £268,275. This is excessively generous to the point of being poor policy.

The relief’s first failing is the way in which it disproportionately channels tax exemptions to those least likely to need the relief. In 2024, the IFS reported that 70% of the relief’s value was claimed by the top fifth of earners. Meanwhile, around a fifth of Brits will gain absolutely nothing from the relief simply because they will never have enough in their pension pot. Against that backdrop, a  tax free lump sum for the wealthiest is a wasteful use of £5.5 billion in annual tax relief.

The relief is especially poorly designed in that it actively encourages retirees to prioritise their short-term interests. Although in principle the lump sum can be withdrawn in multiple bites, in practice many take the opportunity to withdraw it in one go, leaving less for the long term. It increases the risk that savers will leave their pension pots undercapitalised, which could result in greater dependence on state pensions if there are significant improvements to life expectancy in coming years. Tax policy should encourage prudent saving, not create an appealing target for early withdrawal that can increase the risk of poverty in old age.

If it seems surprising that any government would introduce such a flawed relief, the explanation is that the government never intentionally instituted it. In fact, it more or less came about by accident, as civil servants were granted a lump sum on retirement in 1909 and the Inland Revenue decided it wouldn’t be taxable, a decision with enduring effects.

Policy Options

It would be unfair to remove the tax-free lump sum for existing pension wealth, as people have made retirement plans on the basis of its existence. We should avoid effectively retroactive taxes – a principle which helps protect the credibility and integrity of future Budgets. 

The obvious policy solution is to remove the relief from all new pension contributions and accumulations. To allow time for preparation, the government could set the cut-off date a few months later than the Budget. All funds managing pension pots would take a snapshot on the scheduled date to keep a record of which funds are eligible for the relief and which are not. There is a precedent for this snapshot approach in 2006’s ‘A-Day’ pension reforms.

In around 45 years, the relief would be totally phased out and the Exchequer would be £5.5 billion better off per annum (in 2025 prices). There are also gains in the meantime. In year one, we estimate that the savings to the Exchequer would be around £10 million, rising to around £60 million by the final year of this parliament.

As we know, future projected public spending – whether it’s the triple lock or defence – have an impact on borrowing rates today. Policies which credibly accumulate savings over time, such as phasing out the lump sum, can help to push in the opposite direction, lowering borrowing costs in both the long and short term.

Revenue Forecasts:

5. Abolish the Patent Box

Amount raised over time: £1.45bn in 2026-27

Who is affected: ~1600 businesses

Policy Background

In 2009, then-Chancellor Alistair Darling proposed a lower rate of corporation tax on profits derived from a patent. The coalition Government picked up and ran with this idea, introducing a reduced corporation tax rate of 10% on patent income in 2013.

The rationale for the Patent Box is that the UK has a deep interest in encouraging businesses to submit patents and commercialise them. In theory, applying a lower rate of tax to profits derived from patents could encourage more of them. Several European countries also introduced their own Patent Boxes to encourage firms to register patents in their jurisdictions.

Unfortunately, the policy has turned out to be a poor deal for the Treasury. First, it is fundamentally difficult to apportion income to a specific patent. Second, there is already a very strong incentive for companies with patents to commercialise and profit from them. As one study notes, “a Patent Box provides an extra incentive for the kind of R&D that least needs encouragement: R&D whose returns are appropriable via the patent system”.

Most importantly, there is a lack of evidence for the effectiveness of the Patent Box. Before it was introduced, the IFS warned that “the policy will lead to a large reduction in UK tax receipts from the income derived from patents, is poorly targeted at promoting research, will add complexity to the tax system, and it is far from clear that any additional research resulting from the policy will take place in the UK.”

An array of international analyses have similarly concluded that the Patent Box is a misguided policy. One illustrative analysis, also published by the IFS, found that “patented inventions did not increase in the countries offering a Patent Box”, raising the question of “whether the Patent Box is an effective instrument for encouraging innovation in a country, rather than simply facilitating the shifting of corporate income to low tax jurisdictions.” A host of other studies have similarly concluded to the effect that the “Patent Box tax rate is instead targeted at attracting international profit shifting”.

Rather than trying to encourage innovation, the Patent Box is arguably better understood as a crude act of tax competition, seeking to tempt mobile intellectual property to the UK so the Exchequer can claim any resulting tax revenues. The Coalition government was to some extent transparent about this from the outset. In publishing their corporate tax road map in 2011, the Treasury argued that the Patent Box would “enhance the competitiveness of the UK tax system for high-tech companies that obtain profits from patents”.

Whether or not one approves of this style of policy, the most puzzling part is that there never seems to have been any expectation on the part of the Treasury that it would work. In the 2010 budget announcing the introduction of a Patent Box, the Treasury forecast that, far from regaining any revenue, it would cost the Exchequer £1.1 billion a year. By the fiscal year of 2024-25, the static cost of the relief was estimated at £2.4 billion, a figure likely to rise to around £2.6 billion in 2026-27.

Policy Options

We propose complete abolition of the Patent Box. Removing the relief would not mark the UK out as a complete outlier, as important competitor economies like Germany and the US do not have a Patent Box. As detailed above, the reduced rate of corporation tax on patent income is a fundamentally flawed policy, with little evidence of effectiveness. Figures provided in the literature imply that while an incremental policy like increasing the Patent Box tax rate from 10% to 13% would raise around £290 million, abolishing the tax relief would bring in around £1.45 billion.

Revenue Forecasts:

6. Reduce the Effective Rate of Tax Relief for Audio-Visual Expenditure Credits 

Amount raised over time: £375m in 2026-27

Who is affected: ~3615 businesses

Policy Background

In 2007, the government introduced the film tax relief (FTR), aiming to encourage the production of films in the UK by providing a 20% tax credit measured against the value of up to 80% of expenditure. If a film had £10 million of expenditure, the producer could receive up to £1.6 million towards reducing their corporation tax liability or as a cash rebate (depending on if the film was successful enough to generate taxable profits). The Coalition government doubled down on this policy by providing a nearly identical relief for high end television, animation and video games in 2013, followed by similar reliefs for children’s TV, museums and galleries, orchestras and theatre by 2017.

Although these reliefs benefit the spectrum of creative arts, there is little pretence that their purpose is cultural. To benefit from the relief, the entertainment product needs to pass a cultural test set by the British Film Institute (BFI), which includes points for things like whether the characters speak English, or the script is written by a British citizen. This explains how videogames like Grand Theft Auto V and films like Barbie have been able to claim certification as ‘culturally British’.

The economic value of these investments is also debatable. A BFI-commissioned report claimed that the tax reliefs had significant positive impacts, with around £600 million of film tax relief apparently producing £7.685 billion in GVA and £1.893 billion in tax revenue in 2019. These figures appear prominently in HMRC’s own evaluation of the creative sector reliefs in 2022. Other studies show similar positive effects – such as a 2012 report on Belgium, and a 2023 study in Los Angeles.

However, on the rarer occasions when budgetary oversight bodies have studied the same question, they have consistently come to very different conclusions. For instance, the Massachusetts Department of Revenue (DOR), which is required by state law to produce an annual report on the Massachusetts film industry tax incentive program, found that between 2006 and 2017, the state earned just $0.14 for every $1 expended on film incentives. Similarly, California’s Legislative Analyst’s Office (LAO) cited estimates that the state earned between $0.20 and $0.50 for each $1 of film credit.

The analyses published by these fiscal policy bodies help to explain the disparities between their analysis and the BFI (and similar) reports. Crucially, bodies like the DOR consider the opportunity cost of spending on the creative sectors as opposed to elsewhere. This is particularly pertinent in the UK at present, where every additional pound expended by the government contributes to an ever-growing debt and interest bill.

Another key question is the proportion of film production that can be credited to a tax incentive. The LAO, for example, criticises the Los Angeles study for its assumption that “no productions receiving tax credits would have filmed [in California] in the absence of the credit”. By contrast, the LAO suggests on the basis of multiple studies that film tax credits “probably influence the location decisions of 25 percent to 75 percent of credit recipients”.

This point is of great relevance to the UK context. The BFI report assumes that, for the period of 2017 to 2019, 92% of UK film production supported by FTR would not have occurred in its absence. This is based on an online survey which asked producers “how much lower” their production expenditures in the UK would have been in the absence of tax relief.

Remarkably, HMRC cited this report despite noting that “The survey respondents may have had a more instinctive, knee-jerk reaction that more available capital would result in increased budgets”. Indeed, HMRC’s review also included interviews with producers and found that these “qualitative interviewees produced a more considered response about how decisions around budgets are made.”

We should not design tax policy based on online surveys of companies which unsurprisingly state that they would spend more if given greater subsidies. Indeed, we might expect all sorts of industries to report similar preferences, if surveyed, but this would be a poor way to design industrial policy.

Policy Options

For all the flaws in the creative sector tax regime, this paper proposes a more cautious approach than outright abolition. Aside from the political difficulties that would come with eliminating the reliefs, any government must also reckon with the reality that subsidies for entertainment are now very widespread. If the UK removed the reliefs in their entirety, this would make us an outlier relative to key competitors like France, Germany, and the US (where many states offer generous incentives).

A more measured response would be to reduce the generosity of reliefs. A brief biography of film tax relief illustrates that there is no special logic to the current rate of the reliefs. The 2004 Budget increased the generosity of this relief such that it would normally cover 20% of costs without offering an explanation for the change. When FTR was introduced in 2007, this was adapted to a 20% tax credit on up to 80% of expenditure, as detailed above. In 2013, the Coalition government opted to increase the rate of the tax credit to 25%, again without providing any explanation for why a rate of 25% was preferable. Finally, in 2023, the Chancellor announced that FTR and other reliefs would be combined in a new Audio-Visual Expenditure Credit (AVEC), with an effective tax credit rate of 25.5%.

These arbitrary increases have cost the taxpayer. Treasury data shows that the creative sector reliefs collectively cost £2.64 billion in 2024-25, with the expense rising by between 6.9% and 16.8% (in nominal terms) in each of the past three years. Assuming a similar trend, their combined cost will likely reach around £3 billion in 2026-27.

The Treasury could recoup some of this revenue with very moderate reform, such as lowering the effective rate of tax relief from 25.5% to 21%. This could be achieved by reducing the rate of Audio-Visual Expenditure Credits (AVEC) for films and high-end TV from 34% to 28%. A similar change could be made for animation and children’s TV programmes, reducing their AVEC rate from 39% to 32%, alongside comparable reductions to the generosity of the remaining creative sectors’ tax reliefs. This would keep the rate of tax relief for films above where it stood for many years, while making considerable savings. 

On a static basis, this policy change would be expected to raise around £530 million. However, as outlined above, previous research has found that between 7% and 50% of government expenditure on film tax credits is returned in tax revenue. This implies that reducing the effective rate of tax relief from 25.5% to 21% could be expected to save between £265 million and £490 million in 2025-26.

Revenue Forecasts:

7. Place Sensible Limits on Employee Share Schemes

Amount raised over time: £400m in 2029-30

Who is affected: ~110,000 individuals with pre-tax income over £100,000 who use specific tax-advantaged share schemes

Policy Background

For more than half a century, governments of every political stripe have encouraged companies to promote employee share ownership. To advance that aim, the state currently sponsors four different schemes which offer tax advantages. These schemes, while differing in their details, generally allow companies to grant shares to their employees free of income tax and National Insurance (see Appendix for details). Governments have chosen to favour employee share schemes on the grounds that they spread equity more widely, align workers’ interests with those of their employer, and help cash-poor fledgling companies to compete for talent.

However, share schemes are leading to unforeseen, unequal and undesirable consequences.

Take Dave Jenkinson, the former CEO of housebuilder Persimmon. His pay package broadly comprised three parts. There was his basic salary and bonus, which reached just over £1.25 million in 2017. That was supplemented by taxable share award gains of almost £19 million in that year alone.

In addition to this, Jenkinson received a Save As You Earn (SAYE) share scheme option. In 2017, this gave Jenkinson an additional £24,524 gain, totally free of income tax and national insurance. Upon exercising his SAYE option in 2017, Jenkinson was granted a new option and could have added to his tax-free winnings, had he not been forced to resign amid criticism of the quality of homes constructed by Persimmon.

Jenkinson’s departure was announced only 15 months after he had taken the reins from his predecessor, Jeff Fairburn. Fairburn had been the highest-paid executive in the UK, and that proved to be his undoing. In 2017, Fairburn cashed in taxable share awards worth around £45 million, on top of a salary and bonus of almost £2 million. This package caused such a furore that Fairburn ultimately had to leave his post. Overlooked in this affair was the contribution the Treasury had made to his remuneration. Like Jenkinson, Fairburn received an extra £24,524 free of income tax and National Insurance thanks to SAYE. Fairburn had also made £28,964 from his SAYE option in 2014 and was in line for a repeat performance in 2020 before his untimely departure. All in all, Jenkinson and Fairburn had to make do with a combined £89,598 in earnings free of income tax and National Insurance from SAYE before beginning their post-Persimmon lives.

For others, one tax-advantaged share scheme is not enough. Tadeu Marroco, the CEO of British American Tobacco (BAT), was granted an SAYE option in 2015 when he was the company’s business development director. Unfortunately, the company’s share performance was so flat that when the option became exercisable five years later, there was no gain to be had.Fortunately for Marroco, there were gains to be made elsewhere. By the end of 2023, he had accumulated shares worth around £43,000 in a Share Incentive Plan (SIP). The SIP scheme is even more generous than SAYE, exempting the recipient from capital gains tax as well as income tax and National Insurance. Better still, the SIP shares which Marroco had to pay for (most were free from his employer) were funded from his pre-tax salary, so there was tax relief when he received the shares and there will be further tax relief when he comes to sell them. SIP has proved a popular scheme for BAT’s board; as of 2022, they collectively held more than £300,000 worth of shares in their employer through its SIP.

SIP and SAYE do not serve the taxpayer well. If an individual like Fairburn was not sufficiently motivated by a £45 million gain on a share award, a SAYE option worth around £24,524 was unlikely to make the difference. As for the argument that share schemes can help spread equity to the masses, providing a tax-advantaged share scheme to BAT’s directors does not quite fit that vision. The Government’s interest in encouraging entrepreneurship is also not well served by providing a tax-advantaged incentive to the CEO of a tobacco company with a market capitalisation of almost £80 billion. The only explanation left standing is that the unbounded generosity of these share schemes, like so much else in the UK’s tax system, is merely an expensive oversight.

The unrestrained generosity of these share schemes is all the more perplexing in the context of recent UK tax policy. In general, recent tax changes have prioritised removing reliefs for top earners. Examples include reclaiming child benefit payments from anyone with an income above £50,000 through the 2013 High Income Child Benefit Charge (with recent changes increasing the threshold to £60,000). That year, a provision was introduced capping the benefit that can be claimed from certain income tax reliefs at the higher of £50,000 or 25% of total income. In 2015, the government announced that pension tax relief would be tapered for those earning above £110,000. 

But share schemes have remained untouched. Indeed, the only major changes in the past decade have been to make share schemes even more generous, in a way that disproportionately benefits the higher paid. In 2014, the monthly limit for SAYE contributions was raised from £250 to £500, equating to additional tax-free savings of £3,000 per annum. Then, Liz Truss’s famous mini-budget made a further, significant adjustment to share schemes by increasing the company share option plan (CSOP) limit from £30,000 to £60,000, costing the Exchequer just over £100 million. When the mini-budget was systematically swept away by Jeremy Hunt’s Autumn Statement two months later, the change to CSOP was one of the few measures that survived. It is worth noting, for context, that the median UK household saves a total of just over £2,000 a year.

Policy Options

As has been done with many other tax reliefs, the Government could legislate that tax relief on share schemes will not be available to anyone earning above a threshold of say, £150,000 per annum. There are two key details worth expanding on.

First, the key date for applying this limitation would be when the incentive is awarded (i.e. the point at which the share option is granted or the SIP shares are acquired). Although this will often mean that employees will have crossed the £150,000 threshold by the time they cash in their incentive, applying the test when the incentive is initiated ensures certainty around the employee’s future tax treatment.

Second, Enterprise Management Incentives (EMI) should remain exempt from this limitation. As EMI is specifically designed to help entrepreneurial companies recruit top talent, there is a strong argument for providing tax relief irrespective of income level. That would mean only applying the £150,000 limit to CSOP, SAYE and SIP. Firms seeking to attract top talent tend to favour EMI for several reasons, including that the limit on tax relief is generous (set at £250,000 as opposed to £60,000 for CSOP), and they are able to offer it to some employees and not others (unlike SAYE and SIP). By excluding EMI from the policy, the government can therefore raise revenue without having any significant impact on entrepreneurial companies looking to hire talented individuals.

Crucially, we do not suggest that companies’ ability to issue share options or free shares should be restricted. If a company feels that a highly paid executive needs the extra motivation of a CSOP option, they are welcome to grant it. But they should not expect the taxpayer to sugarcoat the incentive further with tax relief.

In terms of how much this would raise, a starting point is the estimate from the Truss mini-budget, that doubling the generosity of CSOP would come at a cost of £115 million per annum by 2026-27. This change should be reversed.

The policy would also make additional savings from the annual £900 million cost of the three relevant share schemes. A Freedom of Information request revealed that the Government holds very little information on the finer details of how this tax relief is distributed; indeed it “identified a data processing error affecting published statistics for Employee Share Schemes in tax year ending 2015 to tax year ending 2021”. The dataset, shared by HM Treasury, showed that in 2019-20, 17.8% of the employees who exercised CSOP options earned at least £150,000 at the point of exercise.

Using this as a proxy for the distribution of tax relief is likely to be a significant underestimate, not least because higher earners will typically have much larger share incentives. However, in the absence of more reliable data, if it is assumed that around 17.8% of tax relief would no longer be available under the policy proposed here, this would equate to a saving for the Exchequer of around £160 million. In combination with the £115 million saving outlined above, this indicates that the total savings from this policy would be around £275 million. Assuming the changes are only applied prospectively, savings would only substantially appear in three years time and onwards, since options granted in the immediate future would not be exercised immediately.

The government may wish to set the threshold lower than £150,000 to increase savings further. The aforementioned dataset shared by HM Treasury showed that in 2019-20, a further 13.6% of tax relief beneficiaries earned between £100,000 and £149,999. This implies that setting the threshold at £100,000 would raise around £400 million.

Revenue Forecasts:

8. Reduce the capital gains tax allowance (£125 million)

Amount raised over time: £125m in 2026-27

Who is affected: ~2.1m taxpayers

Policy Background

A recent trend in fiscal policy has been a reduction in the generosity of allowances. In 2016, taxpayers could earn £5000 from dividends before paying any tax on them. That allowance has been progressively scaled back since then, falling to just £500 in 2024-25. With the exception of the starter rate (discussed above), it is a similar story for savings. As of 2015, the savings allowance stands at £1000 for basic rate taxpayers and £500 for those on the higher rate, before vanishing entirely for additional rate taxpayers.

This has generally been a positive development. The main purpose of allowances is to act as a de minimis threshold, ensuring that taxpayers are not put through the trouble of declaring earnings where the amounts involved are insignificant. By this standard, £500 or £1000 is a far more reasonable threshold than £5000.

This brings us to capital gains tax (CGT). Until 2022-23, the allowance for this levy was set at a sky-high £12,300. That was scythed to £6000 in 2023-24, then a report published by the Office of Tax Simplification (OTS, a government body which advised the Treasury before Liz Truss abolished it), raised the prospect of lowering the allowance to between £2000 and £4000. As chancellor, Jeremy Hunt settled on the midpoint in this range, at £3000.

While reducing the allowance to £3000 marked a significant improvement, there is every reason to reduce it further. With the fiscal situation as tight as it is, the Government could at least opt for the OTS’s lower bound of £2000. Or, they could set the threshold at £1000 or below to more closely align it with the allowances provided for savings and dividends, which are generally between £500 and £1000.

Raising revenue from CGT is also politically easier than some alternatives. HMRC data shows that 378,000 taxpayers were subject to CGT in 2023-24, around 1% of the number who pay income tax. They are also disproportionately wealthy: additional rate taxpayers comprise just 1.3% of earners in the UK, but are overrepresented by a factor of 10 among those paying CGT.

Policy Options

We propose reducing the CGT allowance from £3000 to £1000. HMRC estimates that increasing the allowance by £500 would lose the government £30-35 million in revenue per annum, and we use this to estimate that reducing the threshold by £2000 could raise around £125 million.

Revenue Forecasts:

9. Ban Large Cash Transactions

Amount raised over time: £770m in 2026-27

Who is affected: Businesses seeking to avoid VAT

Policy Background

In 2018, then-Chancellor Philip Hammond launched a consultation on “the future role of cash”. The proposal that grabbed headlines – mostly negatively – was a proposal to do away with 1p and 2p coins. Fourteen months later, the Government disavowed any plan to remove small coins from circulation, and with it, ended up throwing out a separate but seriously good idea raised by the consultation: banning very large cash transactions.

The arguments for banning large cash transactions are overwhelming. As an anonymous method of payment, cash is the lifeblood of economic crime. Europol, the pan-European law enforcement agency, explains simply that cash “is an entirely legal facilitator which enables criminals to inject illegal proceeds into the legal economy with far fewer risks of detection than other systems”.

The UK’s national risk assessment of money laundering and terrorist financing in 2017 made several key findings, the first of which was that high-end money laundering and cash-based money laundering “remain the greatest areas of money laundering risk to the UK”. That review went on to state that “cash, alongside cash intensive sectors, remains the favoured method for terrorists to move funds through and out of the UK”. As the Government places tighter regulations on banks to monitor suspicious transactions, cash becomes even more attractive for those looking to hide their activities.

Set against all this, there is clearly a place for cash in society. As the response to Hammond’s consultation demonstrated, cash is evidently still popular among many people. Besides convenience, cash is vital for Britons without a bank account. Although the number in that category is rapidly falling, the figure stood at around 900,000 in 2024 (down from 1.1 million in 2023).

By banning large cash transactions, the Government can fight financial crime with few adverse consequences. Those without bank accounts tend not to be those making payments worth thousands of pounds.

Countries across Europe have introduced cash limits, with France and Spain opting for a €1000 ceiling (~£868), while Switzerland has a comically large limit of ₣100,000 (~£93,000). In 2024, the EU agreed a limit of €10,000 (~£8681) to apply from 2027, with member states free to retain or set lower limits in their own jurisdiction. By contrast, the Royal United Services Institute notes that “there has scarcely been any debate about the concept” in the UK.

The UK is missing out. With this one change, the Government could crack down on criminals and raise tax revenue. Introducing a cash transaction limit would also remove the need for the High Value Dealers scheme, a programme which requires businesses accepting cash payments of EUR 10,000 or more to comply with a set of reporting requirements.

Meanwhile, the arguments against a cash limit are meagre. The most commonly advanced concern is that cash can provide anonymity for those with legitimate privacy concerns. While this is understandable for some small transactions, it seems less reasonable for the typical circumstances around high-value cash transactions, which often involve payments for construction work, second hand cars or jewellery purchases. It is also worth noting that nine of the largest banks in the UK are required to provide personal current accounts free of fees, providing plenty of choice for those with a legitimate need to transfer large sums of money.

Policy Options

There are no UK-specific studies on the fiscal impact of a ban on large cash transactions. However, a 2020 paper estimates the impact of a 2011 Italian policy of reducing the cash transaction limit from €5000 (~£4340) to €1000 (~£868). Italy has a much larger tax gap than the UK, which complicates comparisons between the two.However, the paper issued some estimates which could be broadly transferable. One conclusion was that the policy in Italy reduced the VAT gap in that country by between 9.5% and 19%. As the VAT gap is larger in Italy than the UK, the savings in the UK would be correspondingly smaller. However, a 9.5% reduction in the UK’s VAT gap would still equate to savings of £770 million.Another observation was a reduction in Italy’s income tax gap. We have not accounted for this in the UK, making our estimate even more conservative.

We recommend a £1000 limit, which could meaningfully affect tax evasion and other crime while having no effect on the overwhelming majority of legitimate cash transactions. 

This policy requires careful implementation. It would be prudent to delay the policy at least until the start of the next tax year, to allow those legitimate parties affected to open bank accounts. The UK may also wish to consider an exception for tourists – this is the approach of many European countries. 

The Government would additionally need to determine the penalty for violation. Countries with similar laws have used a range of fines, with France issuing penalties of up to 5% of the transaction value, and Italy charging violators between €3000 (~£2608) and €50,000 (~£43,477). The Spanish approach of levying a fine equal to 25% of the transaction value – with a 50% discount for prompt payment – may provide the best model for a penalty that is proportionate and straightforward.

Revenue Forecasts:

10. Enforce Foreign Companies’ Disclosure of Beneficial Ownership

Amount raised over time: £50m in 2026-27

Who is affected: Foreign corporate owners of ~109,000 UK properties

Policy Background

For all that it is maligned as the playground of corrupt elites, the UK is in many respects a leader in transparency and disclosure. Since 2016, companies incorporated in the UK have been required to publicly disclose their ultimate beneficial ownership, primarily including any individuals who ultimately control at least 25% of the company’s shares or voting rights. 

In response to Russia’s full-scale invasion of Ukraine, the UK legislated that foreign companies with UK property holdings would also need to publicly disclose their beneficial ownership on a Register of Overseas Entities (ROE). This was a great step forward in transparency and contributed towards the enforcement of sanctions.

Yet despite this advance, the ROE has fallen far short of acting as a comprehensive database for UK properties held by foreign companies. A paper published by the CAGE Research Centre at the University of Warwick found that as of 1 August 2023 - months after the deadline for registration of 31 January 2023 - essential information was missing for 109,000 of the 152,000 properties owned by overseas entities.This sparse coverage is attributable to loopholes in the law and widespread noncompliance. The authors estimate that between 9000 and 13,000 properties are not registered at all. There are also around 8000 properties where the corporate owner has listed another company as a beneficial owner, without any record of that parent company’s ownership, another violation of the law.

Then there are loopholes. The most significant is the allowance for companies to effectively sidestep the rules by listing a trust as their beneficial owner. As of August 2023, an extraordinary 69,000 properties were exempt from publicly declaring their beneficial ownership on this basis. 

A Failure of Enforcement

Where there are violations, the authorities are empowered to refer cases for prosecution and issue fines. The amounts involved are sizable, with penalties of around £10,000 for properties in council tax bands A to C, rising as high as £50,000 for those in council tax bands G and H. Companies House have used those powers to issue fines worth £22.99 million to 444 companies for failing to register on the ROE.

The problem starts with enforcement of these fines. In April 2025, the FT reported that just 3% of the £22.99 million issued in fines had been collected. This is puzzling when the fines in question ultimately relate to UK property, an asset which should be particularly easy for the UK government to enforce against. This failure to collect contrasts starkly with the imposition of penalties for council tax arrears, which has been pursued so aggressively that the government is currently consulting on the need to temper enforcement action.

This is just one aspect of a far wider failure of enforcement. As well as the 8000 cases where the corporate owner appears to have broken the law by listing another company as a beneficial owner, there are in all likelihood many more companies which have illegally provided false information. One might be sceptical, for example, of some of the 10,500 cases where the registrant claimed that the company has no owners who meet the statutory definition of a beneficial owner. The same would apply to the 7300 properties where the registrant was happy to name individuals who exercise significant influence or control over the company but withheld the names of any beneficial owners. The 1300 properties where some beneficial owners have been declared and others omitted may be the most curious category of the lot.

This context makes it all the more remarkable that, in response to a FOI request, Companies House confirmed that while companies had been penalised for not registering on the ROE, “no penalties have been issued to a registered overseas entity for not properly declaring their beneficial ownership”. This is a serious oversight in the enforcement of anti-corruption legislation, and one which suggests that the state is missing a significant opportunity to profit from punishing criminality.

The lack of enforcement goes well beyond the ROE regime. Companies House is infamous for the prevalence of companies with fraudulent or obviously false information. In spite of this, as of 2018, the only person convicted for providing false information was someone who listed senior politicians as directors to make a point about Companies House’ lax enforcement standards.

The same problem exists with the rules requiring UK companies to disclose their beneficial ownership. In March 2025, a report from Tax Policy Associates estimated that 50,000 companies were unlawfully evading their responsibilities by listing a foreign company as a beneficial owner. Far from penalising these entities en masse, Companies House stated that over the past seven years, only 363 companies have been penalised for not properly declaring who controls them, raising a paltry £193,897.

Policy Options

The obvious policy response is to robustly enforce the law against companies which do not provide complete, genuine beneficial ownership information. That should extend to closing obvious loopholes like the allowance for trusts to withhold the names of their beneficiaries. Additionally, non-payment should be penalised with the vigour currently reserved for pursuing council tax arrears, with charging orders imposed on properties where necessary. In combination, we expect these measures to raise around £50 million.

However, the significance of this policy goes beyond the modest sum it would raise. There is the basic principle that a law is only as good as its enforcement. The requirement to disclose beneficial ownership was rightly introduced to strike against corruption and related crime. By failing to take action against companies that submit false information, the current enforcement regime nullifies the law and its logic. The current failure to collect fines from foreign corporate owners of UK property feeds an impression of incompetence in parts of the state, and the fact that it is largely offshore shell companies profiting only makes matters worse. Proper enforcement offers a chance to fix this. 

Revenue Forecasts: