Make Tax Fair

A New Universal Income Tax

We propose consolidating an array of separate levies into a single, streamlined tax. This would replace:

  • Income Tax
  • Capital Gains Tax
  • VAT
  • Stamp Duty
  • Inheritance Tax
  • National Insurance (NI)
  • Business Rates
  • Council Tax

    • This new Universal Income Tax would be levied simply on all forms of income. For the purpose of this system, income is defined straightforwardly as any net increase in money.

    Note on Supplemental Taxes: A few specific taxes would remain, but they would be limited to user-pays models for specific services (e.g., Road Tax) or punitive levies designed to discourage harmful behaviors (e.g., duties on fuel, alcohol, and tobacco).

    1. The Taxation of Money

    Under this system, only money is taxable, and tax can only be paid in money.

  • Definition of Money: "Money" encompasses GBP, foreign currencies, and cryptocurrencies—essentially any fungible token of value.
  • Account Access: All money will be held in accounts accessible to HMRC for verification purposes.
  • Taxable Events: Any money paid into an account from a source not owned by that individual or company is potentially liable for tax.
  • Internal Transfers: Moving funds between accounts owned by the same entity (e.g., from a current account to a savings account, or converting GBP to USD or Bitcoin) is entirely tax-free, as there is no net increase in wealth.
  • Multi-Currency Settlement: Tax is calculated and paid in the specific currency of the account where the income was realized. HMRC must be equipped to accept payments in any recognized currency.
  • Reporting: Reporting mechanisms for businesses and the self-employed would mirror current digital frameworks. For employees, employers would remain responsible for reporting to HMRC and deducting tax at source via an updated tax code system.
  • Exceptions: In some cases, where amounts are low and sporadic, the receipt of money would not be treated as income. Great care would be needed to ensure the rules around exceptions do not provide a loop-hole for the rich to avoid tax.

    • 2. The Taxation of Assets

    Assets will not incur tax directly. Tax is only triggered when asset value is realized or made liquid—whether through sale, transfer, or borrowing against the asset to raise capital.

  • Value Realization: If an asset's value is realized or transferred, its valuation at that specific time is treated as money and taxed accordingly.
  • Lifetime Transfers & Inheritance: Ultimately, assets can only be held for a lifetime. If they are not sold, they are eventually gifted, inherited, or transferred. This results in a monetary gain for the recipient, triggering a potential tax event.
  • Taxing the Gain: Tax is levied only on the appreciation of value relative to the initial investment. The recipient pays tax on the value they receive, while the transferor pays tax on any realized gain. In the case of inheritance, tax is paid exclusively by the recipient (effectively replacing Inheritance Tax with Income Tax), as the deceased receives no material benefit.
  • Inflation Indexing: To ensure fairness, the calculation of an asset's capital gain must factor in the effect of inflation over the period since the initial investment was made.

    • 3. The Personalised Non-Taxable Allowance

    The standard tax-free personal allowance would remain but be set at a level which covers the essential living expenses for an individual which would be regularly reviewed and set according to clearly defined rules. Essential expenses cover housing, energy, food, clothing, and investments.

    Personalised component:-

  • Housing: Typical mortgage interest or rental costs.
  • Investment: An allowance for pension contributions and other targeted investments.

    • Fixed component:-

  • Energy: The typical cost for a baseline amount of energy per person (e.g., 1 MWh of electricity per annum).
  • Food: The average cost of basic fresh food and essential toiletries.
  • Clothing: A standardized allowance to cover basic wardrobe needs.

    • The personalised component would not be automatically applied and need to be claimed by the individual. In the case of a couple living together only one of them would be paying the mortgage or rent and warrant the personalised component for that. The housing component is an amount that reflects what might be considered a minimum amount needed to afford a reasonable standard of housing not the actual amount paid.

    This personalized allowance would be converted into a tax code, seamlessly integrating with the current payroll architecture. Citizens would be assigned a conservative default tax code unless they provide the necessary evidence to claim a higher personalized allowance.

    4. Progressive Taxation Structure

    To raise sufficient revenue, reflect true financial capability, and maintain public consent, the Universal Income Tax must be progressive. To avoid arbitrary "cliff-edges," progression is calculated as an increasing percentage based on multiples of the individual's personalized non-taxable allowance (a):

    The following is just to illustrate the concept:-

  • Income up to personalised allowance : No tax
  • Income above personalised allowance : 20% tax
  • Income above double the personal allowance : 30%
  • Income above triple personal allowance : 40%

    • 5. Implementation

    Recognising the risks of a complete overhaul of taxation it is reasonable to expect any implementation to need to be introduced in stages. For example:-

    5.1 Align Capital Gains with Income Tax

    This would raise more revenue and the basic rate of income tax could be reduced or tax free allowance increased.

    5.2 Abolish inheritance tax

    Treating inheritance as income would mean more would be raised and tax rate could be reduced further.

    5.3 Roll other taxes into income tax

    Eventually, the move to merge all taxes into one will mean increasing the tax rate to compensate.

    Some people will probably need to pay more than they would under the old system (eg. somebody currently not paying council tax) and the rates would need to be increased gradually to avoid shock.

    With this in mind the additional revenue of previous changes would not initially be entirely passed on in tax reductions.

    Download Summary Leaflet