Tax Simplification

The Problem

The UK tax code runs to over 17,000 pages and adds roughly a thousand pages every year. It is the longest in the world. Hong Kong's is around 350 pages. Ireland's is under 1,000. Singapore's is under 600. All three countries raise competitive revenue, because simplicity raises compliance rates and reduces the avoidance that complexity enables.

The complexity in the UK is not accidental. Every loophole exists because someone lobbied for it. Every exemption was inserted to solve one problem while creating three more. The result is a system the comfortable can navigate with expensive accountants, while ordinary workers pay the headline rate on every pound they earn. HMRC estimates the annual tax gap at 36 billion pounds. Forty-six percent of that gap, around 16 billion pounds, comes from errors and carelessness caused by navigating a system nobody fully understands.

A. Universal 15% VAT

VAT applies to all goods and services at a single rate of 15%. No zero-rating. No exemptions. No separate reduced rates for charity shops, sanitary products, or solar panels. The current system has three rates, hundreds of product classification disputes, and an entire specialist industry arguing about edge cases. We replace it with one number.

Businesses continue to reclaim input VAT exactly as they do now. The reclaim mechanism stays because removing it would cascade costs through the supply chain and make British manufacturing uncompetitive. The simplification comes from one rate instead of three, from ending legal disputes about VAT classification, and from removing the complexity that currently allows small business owners to partially reclaim VAT on personal expenditure.

Yes, this means VAT on food

We are honest about this. A weekly food shop of 80 pounds would cost roughly 12 pounds more. We do not compensate people with cash payments because that would recreate bureaucracy, breed dependency, and eventually be riddled with the same targeting errors as every other benefit. Instead, the revenue from a broader VAT base is used to reduce income tax rates directly. The reduction shows on every payslip. You pay a little more on food. You pay less on your income. For most earners the income tax saving is larger.

The hardest case: large low-income families

The genuine challenge is a household with five or six people on a combined income of £22,000. Their food spend as a proportion of income is higher than average. The income tax saving on £22,000 is approximately £500 to £600. The VAT on food for a large family could be £800 to £900. For this specific household, the reform may not fully compensate through income tax alone.

Forge addresses this through three mechanisms that do not recreate a targeted benefit:

• Universal Credit food element. The standard allowance within Universal Credit rises by £400 per year from the date the VAT reform takes effect. This is not a new benefit or a new means test. It is an uprating of the existing UC standard allowance that already covers roughly 5.5 million households. The cost is approximately £2.2bn annually, funded from the VAT revenue. Everyone on UC gets it automatically. No application, no eligibility check beyond already being on UC.
• Free school meals extended to all primary school children regardless of income, and extended to all secondary school students from households on UC or earning below £30,000. The school meal already exists. Extending eligibility costs approximately £800m annually and ensures that for the children of low-income large families, the daily hot meal is not affected by the VAT change.
• Child Benefit uprating. Child Benefit increases by £200 per child per year from the date of the VAT reform. A family with three children receives £600 more annually. Combined with the UC standard allowance increase, a large low-income family is fully compensated without a new means-tested system.

These three mechanisms together cost approximately £4bn annually and target the households most exposed to the food VAT increase without creating a new bureaucratic targeting system. The principle holds: the compensation comes through existing payment routes that are already reaching the people who need them.

Stopping personal spending through companies

The VAT registration threshold is held at 90,000 pounds turnover, not raised. Raising the threshold was considered and rejected: it would help slightly larger firms compete against the smallest sole traders, which is the opposite of protecting the small self-employed tradesperson. Keeping the threshold where it is protects the competitive position of the plumber, electrician, and decorator working just below it. The cliff-edge problem (businesses deliberately staying under the threshold) is addressed through a smoothing mechanism: businesses crossing the threshold receive a tapered transition relief over two years rather than facing the full registration burden overnight. For registered businesses, the "wholly and exclusively for business purposes" test is tightened with real enforcement:

• Items used personally more than 20% of the time cannot be reclaimed as a business expense
• Solo-director companies cannot claim VAT on vehicles or electronics unless the company has at least one other employee
• Random HMRC audits on small company VAT claims, with automatic penalties for systematic abuse
• This closes the well-known route where individuals set up a one-person company specifically to claim back VAT on a laptop, a car, and a home office that serve primarily personal purposes

B. Dividends Taxed as Income

Currently a company director who pays herself a minimum salary of 12,570 pounds and takes 80,000 pounds in dividends pays thousands less in tax than an employee earning 92,570 pounds as a salary. This is the single most-used tax avoidance route in the UK, used by over 2 million Ltd company directors. It costs the Treasury an estimated 5 to 8 billion pounds per year. We end it entirely.

• All dividend income taxed at the same rate as employment income. No separate dividend tax rates. No dividend allowance. If you take money out of a company you control, it is income, and it is taxed as income. The rate is the same whether you earn it by working for someone else or by directing your own company.
• Business Asset Disposal Relief abolished. This relief let business owners pay just 14% CGT on the first million pounds of gains when selling a company, rather than the standard 24%. It was designed to reward genuine entrepreneurs but is widely used by anyone who has incorporated. Business disposals now pay the standard CGT rate of 18% or 24% like any other asset sale. Your main home remains fully exempt.
• Pension contributions tax-relieved up to 20,000 pounds per year. Above that, treated as taxable income in the year of contribution. This closes the bonus-to-pension sheltering route used by very high earners to effectively pay zero tax on large bonuses routed through salary sacrifice into a pension wrapper.
• All dividend income from companies where you hold a controlling interest treated as earned income of the controller. Paying dividends to a spouse who does no work in the company is a common method of splitting income to use two tax-free allowances. This ends.

How simplification pays for itself

C. Capital Gains on Death: Closing the Permanent Tax-Free Holding Loophole

Equalising Capital Gains Tax with income tax rates creates one obvious problem if not addressed directly: nobody would ever sell. A wealthy asset holder facing CGT at income tax rates simply holds the asset for life, benefits from any income it generates, and passes it on at death. Under current law the accumulated gain is wiped clean at death, the beneficiaries inherit at current market value, and all the CGT that accrued over decades is permanently untaxed. This is called the CGT uplift on death, or rebasing.

The CGT equalisation in Section B is only coherent if the death uplift is removed at the same time. Otherwise the reform simply converts a tax-while-living problem into a never-sell-hold-to-death strategy, which is worse. Canada has charged CGT on death for decades. Australia does the same. It is not a radical proposal. It is the logical completion of taxing gains.

How CGT on death works under Forge

• CGT charged on accumulated gains at death as if the assets were sold at market value on the date of death. The gain is calculated from the original acquisition cost (or value at April 2026, whichever is later, to avoid taxing historical gains already priced in before the reform). The estate pays CGT on the gain before distribution to beneficiaries.
• The main residence remains fully exempt. The family home does not trigger CGT on death, as it does not trigger CGT on sale now. This protects the overwhelming majority of ordinary households for whom the family home is their largest asset.
• Lifetime CGT exemption of £500,000 covers all gains above the annual exempt amount across a lifetime. This protects genuinely modest estates, early retirees selling a small business built over a career, and family situations where a combination of assets produces a moderate total gain. Only estates with total lifetime gains above £500,000 (above the main residence and above the annual allowance) face death CGT.
• Payment deferral for illiquid assets. A farm, a family business, or unlisted shares cannot always be liquidated to pay a tax bill without destroying the asset. Where the estate cannot pay the CGT liability within 12 months without forced sale of an illiquid asset, the liability defers and is paid over up to 10 years with interest at Bank of England base rate. This protects the family farm and the small business without creating an indefinite deferral that effectively reinstates the loophole.
• CGT paid on death is deductible from the IHT calculation. The two taxes do not stack in full. Every pound of CGT paid on a gain reduces the IHT base by the same amount. You pay one or the other on each pound, not both in full. This prevents a punishing double taxation of the same underlying value while still capturing the gain that has been deferred through life.
• Agricultural and Business Property Relief for IHT is retained for genuine working farms and trading businesses, but the CGT deferral applies to those assets too. The gain is deferred, not forgiven. On eventual sale outside the family, the deferred CGT is collected.

Special treatment for genuine working farms

Productive agricultural land is materially different from an investment portfolio. A farm worth £3 million may generate £40,000 in annual profit. A tax bill cannot be paid from that income without selling land, which breaks the farm. Land price inflation reflects market forces, not active profit-taking by the farmer. And fragmentation of productive farmland has a national food security consequence that a forced sale of shares does not.

Forge therefore distinguishes genuine working farms from investment land held in agricultural form primarily for tax purposes:

• Lifetime agricultural CGT exemption of £2 million on genuine working farm land, on top of the £500,000 general lifetime exemption. A farm that has been in a family for generations and is actively worked triggers no CGT on death up to this threshold. Only the largest agricultural estates face any CGT liability on death.
• 20-year payment deferral for farm land rather than the 10-year deferral for other illiquid assets. Interest accrues at base rate. The deferred CGT falls due if the land is sold or converted to non-agricultural use within 20 years. If the family farms it for 20 years and passes it on again, the deferred liability resets. The farm stays a farm.
• Inheritance Tax: full Agricultural Property Relief restored for genuine working farms, reversing the Labour government's April 2026 restriction. Under Labour, APR is capped at £2.5 million per individual. Forge removes that cap for land that is actively farmed. The HMRC test is the existing one: the land must have been used for agricultural purposes and the owner must have had a farming interest for the required period. The farmer who works the land pays no IHT on it regardless of its value.
• The abuse route is closed separately. Land held in agricultural form by a company, trust, or investment vehicle without active farming does not qualify for APR. The test is active farming by the owner or a family member in occupation. Tenanted land qualifies at 50% APR as it does now. Land held as a land bank with minimal active use does not qualify at all. This closes the route where wealthy investors buy agricultural land purely to shelter assets from IHT, which is the genuine abuse the Labour reform was trying to address, badly.

Estimated revenue

CGT on death is estimated to generate £3 to 5 billion annually at full operation. The uncertainty reflects the behavioural response: some asset holders will choose to sell before death and pay CGT while alive (which generates the same revenue sooner), some will gift assets earlier triggering the existing 7-year PET rule, and some will restructure into IHT-exempt forms. The HMRC behavioural modelling suggests net revenue of £3 to 4 billion once these responses are accounted for. This is additional to the CGT equalisation revenue from Section B.

D. Every Loophole Closed

The current system rewards those who can afford accountants to restructure their income. Below is every major loophole we close, what it does now, and what replaces it.

E. Profit Shifting: Tax Where You Sell

Google, Amazon, Starbucks, Meta and dozens of other multinationals generate billions in UK revenue but declare minimal UK profit by routing sales through Ireland, Luxembourg, or the Netherlands. The UK introduced a Digital Services Tax in 2020 and a Diverted Profits Tax in 2015. Both are routinely circumvented through sophisticated transfer pricing. The gap between what these companies should pay and what they actually pay runs to billions annually.

• Tax based on UK revenue, not declared UK profit. Any company generating over 10 million pounds in UK annual sales pays a minimum effective rate based on a deemed profit margin of 10% of UK revenue. If a company declares less than 10% UK margin, the difference is taxed automatically without challenge. No more declaring 50 million in profit on 1 billion in UK sales.
• Full implementation of the OECD Pillar Two global minimum tax at 15%. The UK enacted Pillar Two legislation in 2024 but enforcement is under-resourced. Forge creates a dedicated Multinational Tax Compliance Unit within HMRC with 500 specialist investigators and full access to country-by-country reporting data. Annual public report on additional revenue recovered per major group.
• Transfer pricing documentation requirements strengthened. Multinationals must submit group-wide country-by-country reports showing where profits are booked against where revenues are actually generated. Discrepancies of more than 20% between revenue location and profit location trigger automatic audit.
• Estimated additional revenue: 2 to 4 billion pounds annually from multinationals that currently pay negligible UK corporation tax on very substantial UK operations.

F. Online Marketplace Liability

Shein, Temu, AliExpress, Wish, and dozens of similar platforms ship thousands of packages to the UK daily. Products frequently lack UKCA safety markings, fail UK flammability standards, and contain chemicals that are banned in this country. Children's toys arrive without any safety certification. The current enforcement system inspects fewer than 1% of individual small packages at the border. There is no practical way to enforce product safety on millions of individual international shipments made by anonymous overseas sellers.

• Platforms are legally responsible for the safety compliance of everything they sell to UK consumers. If a child's toy sold through Shein fails UK safety standards and a child is harmed, Shein is liable. Not the anonymous seller registered in Guangdong. The platform. Fines link to global revenue under the Corporate Accountability Act (Section IX). A platform that cannot guarantee product safety compliance must stop selling to UK consumers.
• Mandatory UKCA marking for all imports sold to UK consumers. Every product sold to a UK address, regardless of origin or individual value, must carry valid UKCA marking with a traceable UK-based responsible person named on the product. Platforms listing non-compliant products face escalating fines. Repeat offenders face blocking orders preventing UK payment processors from handling their transactions.
• VAT collected at platform level on every UK sale, no threshold, no exemption. The platform collects and remits 15% VAT on every transaction with a UK delivery address. This ends the situation where overseas platforms undercut UK retailers by not charging VAT that UK retailers must charge. The UK has had an equivalent rule on digital services since 2015 but has never enforced it on physical goods. Forge enforces it.
• Estimated additional VAT revenue: 1 to 2 billion pounds annually from overseas platforms currently operating without VAT compliance on UK physical goods sales.

F. Cut the Jobs Tax: Employer National Insurance Reform

The single most economically damaging tax in Britain is employer National Insurance. It is a direct tax on employment. Every pound an employer pays in National Insurance makes it more expensive to hire a person, hold onto staff, or give a pay rise. It falls hardest on the businesses that employ the most people relative to their turnover: care homes, shops, restaurants, pubs, and small workshops.

We considered a business rates cut. We rejected it. The evidence is clear that business rates reductions are substantially captured by commercial landlords through higher rents as leases renew, with only 25 to 50% of the benefit reaching the actual business. A landlord cannot capture a National Insurance cut. Every pound of employer NI reduction goes directly to reducing the cost of employing people. So instead of cutting business rates, Forge cuts the jobs tax.

• Raise the employer National Insurance threshold from £5,000 to £14,000 per employee. Employers currently pay 15% National Insurance on everything an employee earns above £5,000 per year (a threshold the previous government lowered in 2025, increasing the cost of employment). Raising it to £14,000 means employers pay no National Insurance on the first £14,000 of every employee's wages. This helps every employer in the country, and it helps the low-wage, high-headcount sectors most: social care, hospitality, retail. Estimated cost: £7 billion.
• Expand the Employment Allowance from £10,500 to £15,000 for small businesses. The smallest firms pay zero or near-zero employer National Insurance. A small business employing four people on modest wages pays no employer National Insurance at all. Estimated cost: £2.5 billion.
• The combined effect: it becomes meaningfully cheaper to employ people across the whole economy, with the largest proportional benefit going to small businesses and labour-intensive sectors. This is funded from the same fiscal envelope that a business rates cut would have used, approximately £9.5 billion, but the money reaches employment and wages rather than commercial landlords.

G. Business Rates: Structural Rebalancing, Not a Cut

Business rates are genuinely broken. They have not been fundamentally reformed since the 19th century. High-street shops, pubs, cafes, and salons pay full rates on visible town-centre premises while online retailers pay warehouse rates on distant fulfilment centres, paying nothing equivalent to occupying a high street. The system has accelerated the decline of local high streets for two decades. But the answer is not a blanket cut that landlords capture. It is structural rebalancing that is revenue neutral and cannot be passed to landlords because it changes who pays, not how much is collected overall.

• Shift the burden toward large online distribution warehouses and out-of-town fulfilment centres. The business model that has hollowed out high streets pays a rate that reflects the infrastructure and delivery burden it places on the country.
• Relief for high street and town-centre premises. Shops, pubs, cafes, and workshops in town centres pay less. Properties under £25,000 rateable value pay nothing, eliminating business rates entirely for approximately 400,000 of the smallest premises.
• Annual revaluation replacing the current slow 3 to 5 year cycle, so bills track actual market reality and avoid the cliff-edge shocks that arrive when large revaluations happen infrequently.
• Online marketplace supplementary levy. Large platforms with over £500 million in UK revenues pay a supplementary digital infrastructure contribution of 0.5% of UK gross revenue, additional to corporation tax.
• The rebalancing is revenue neutral overall, so it has no net fiscal cost, while delivering the high-street relief the 40% cut promised without handing money to commercial landlords.

G. A Simpler Tax Return

For the majority of earners in employment, HMRC issues an automatic annual tax statement calculated from payroll data, bank interest reports, and Benefits data already held. The taxpayer receives it, reviews it, and confirms it is correct. No form to fill in. No deadline to remember. No accountant required.

• Self-assessment required only for genuinely complex affairs: the self-employed, those with multiple substantial income sources, businesses, and those receiving taxable income from trusts or overseas sources
• Target: 80% of taxpayers never complete a tax return in their lives
• HMRC pre-populates statements from employer payroll data, bank interest (already shared via reporting requirements), dividend data from Companies House, and benefits data from DWP
• Disputes and corrections handled through a simple online interface with a 28-day resolution guarantee
• Paper option retained for those without reliable internet access
• The UK X-Road digital backbone (Section XVII) links these data sources in real time so the pre-populated statement is accurate rather than approximate

The Full Comparison

Why This Works

Hong Kong's tax code is 350 pages. Singapore's is under 600. Ireland's is under 1,000. All three raise competitive revenue with higher compliance rates than the UK, because simplicity reduces avoidance by removing the complexity that avoidance depends on. The UK has been adding pages to the tax code for 40 years and losing more to the tax gap every decade. The evidence is conclusive: complexity costs more than it collects.

New Zealand abolished most tax exemptions in the 1980s and has maintained one of the most efficient tax systems in the developed world since. Canada's GST is a single rate applied broadly. Australia moved to a broad-based GST in 2000. All three are comparable economies. All three made similar reforms. All three have simpler, more productive tax systems as a result.

The political difficulty is not economic. It is that every loophole has a beneficiary who will fight its removal. The dividend industry. The offshore trust world. The accounting firms whose income depends on complexity. The Shein shareholder. Each will produce a different argument for why their specific benefit is actually in the national interest. None of those arguments is right. The national interest is a simpler, fairer system where everyone pays the rate on the tin. That is what Forge will deliver.