The UK’s regulation of political donations is built on the principles recommended by the Neill Committee in 1998: transparency in political giving, a ban on foreign donations, and setting a limit on campaign expenditure (which would reduce dependence on large donors). Corporate donations pose a particular challenge to the first two of these principles, as UK companies can be used to conceal the identity of the true donor or to allow foreign individuals to channel donations into UK politics. In this report we provide new empirical evidence of the extent to which corporate donations currently undermine the principles of transparency and the ban on foreign interference. Against that background, we assess the reforms proposed in the Representation of the People Bill which is currently going through parliament, and we present recommendations on how to strengthen the Bill to achieve its stated aims.
A. Summers, A. Advani, C. Jung, C. Belfield, D. Neidle, H. Peaker, J. Howat, J. Lawson, R. Colvile and R. Shorthouse (2025), CenTax
The Government has stated that economic growth is its overwhelming priority. One of the main barriers to growth is the tax system, which contains many arbitrary and nonsensical rules. This document – authored by experts from think tanks across the political spectrum – provides a set of packages that would move the UK towards a fairer, more effective and more pro-growth tax system. This is a framework for the direction of reform, not a precise blueprint.
CenTax's response to Budget 2025, covering income tax thresholds, taxation of property and savings income, pensions, the high-value council tax surcharge, electric vehicle road pricing, employee ownership trusts, and agricultural and business property relief for inheritance tax.
Partnerships do not pay an equivalent of Employer National Insurance Contributions, meaning that they face significantly lower effective tax rates on their labour costs than companies. This report argues that introducing a 'Partnerships NICs' would improve productivity and raise £1.9 billion per year. We present novel statistics on the distribution of partnership profits in the UK and discuss how much revenue could be raised from our proposed reform. Our analysis draws on pseudonymised administrative data accessed via HMRC, which provides information on all taxpayers with partnership profits in the 2020 tax year.
In the Autumn Budget 2024, the Government announced a reform to Inheritance Tax (IHT) that reduced the reliefs available for agricultural and business property ('APR' and 'BPR'). From April 2026, the first £1 million of combined qualifying agricultural and business property (the 'combined allowance') will continue to receive 100% relief, but above this threshold, relief will be reduced to 50%. The new combined allowance of £1 million per estate is in addition to the Nil Rate Band (NRB) and Residential Nil Rate Band (RNRB) covering up to £1 million per couple. As a result of the reform, the value of farmland and business assets exceeding these allowances will face an effective tax rate of up to 20%, whereas previously these assets had been tax-free. The tax can be paid in interest-free instalments over ten years. The reform has proved highly controversial, especially regarding its potential impact on farmers. This report presents the first independent, evidence-based analysis of the impact of the planned reform using HMRC Inheritance Tax data. We provide a detailed impact assessment and model potential adjustments to the reform.
'Carried interest' (or 'carry') is one of the main forms of pay in the private equity industry. Unlike earnings, which are taxed at a top marginal rate of 47%, carried interest is currently taxed as a capital gain at the rate of 28%. The tax treatment of carried interest is highly controversial. Following the 2024 General Election, the Government reiterated its intention to 'close the carried interest loophole' by taxing carry like other performance-related rewards. However, it has come under significant pressure to scale back these plans following claims by industry insiders that increasing taxes on private equity executives could lead to a mass exodus of individuals and investment from the UK. Despite extensive public interest in this debate, there is virtually no statistical evidence in the public domain about how much carried interest private equity executives actually receive, how often they receive it, their demographic characteristics, how much (if any) of their own capital they put at risk in their funds, and so on.
A. Advani, S. Gazmuri-Barker, S. Mahajan, C. Poux and A. Summers (2024), CenTax Policy Report
'Carried interest' (or 'carry') is one of the main forms of pay in the private equity (PE) industry. Only around 0.01% of the UK population (6,440 individuals) reported any carried interest between 2017 and 2023, but over that period their total carry exceeded £22 billion. Carried interest is extremely concentrated amongst top executives. In 2020, the top 100 executives received an average of £15 million in carry each and paid an average effective tax rate of 29% on their total income and gains (including gains on co-investments taxed at 20%).
Inheritance Tax (IHT) applies at a flat rate of 40% to estates worth over £325,000. This 40% rate has extremely high salience with the public and may be one of the reasons why IHT is regularly cited as the UK's most unpopular tax. And yet, most estates do not actually pay 40% tax, or anywhere close to this. The explanation lies in the proliferation of allowances, exemptions and reliefs for IHT (referred to as 'reliefs' for short), which mean that the statutory tax rate is not a good guide to the effective tax rates that estates actually pay. In this report, we use de-identified tax data covering all estates filing for IHT between 2018-2020 to shed new light on IHT reliefs and their role in driving differences in effective tax rates across estates. We also evaluate whether these apparent inequities can be justified in light of other policy objectives. Finally, we discuss options for reforming IHT reliefs and provide evidence on the revenues that could be raised.
Few UK policies have faced as turbulent a history over recent decades as Capital Gains Tax (CGT). The current CGT regime is the product of a series of contradictory reforms that have rendered the rules needlessly complex, inefficient, and unfair. Laying out a roadmap for much-needed change, this report recommends a comprehensive package of CGT reforms going beyond changes to the tax rate. We use de-identified tax data accessed via His Majesty's Revenue and Customs (HMRC) to provide estimates of the revenue and distributional impacts of these recommendations. Importantly, our policy proposals include changes to the tax base that will shut down opportunities for tax avoidance and improve investment incentives and growth. We emphasise that these measures are essential alongside any increases in the tax rate in order for CGT reform to be effective.
A. Advani, H. Hughson, J. Inkley, A. Lonsdale and A. Summers (2024), CenTax Policy Briefing
Capital gains are currently taxed at much lower rates than income. This encourages individuals to work in a form that allows them to be paid in capital gains. While many small companies are highly productive, these personal service companies are typically not designed to ever grow. A negative side effect of low CGT rates is the proliferation of these businesses, which not only reduce the overall tax take, but hamper productivity by having people working in ways that are less efficient but are individually optimal because of the tax saving. We present new quantitative evidence that a large share of capital gains in the UK are, in fact, the returns to labour rather than capital.
A. Advani, C. Poux and A. Summers (2024), CenTax Policy Briefing
The UK is unusual amongst international peers in not levying any tax on people who leave the country after making substantial capital gains whilst living here. We provide the first quantitative evidence on UK nationals who leave the UK after building a UK business, studying where they went and how much CGT revenue is potentially lost. We recommend that the UK should follow the approach of Australia and Canada by levying a 'deemed disposal on departure' (DDD) for people who leave the UK, accompanied by 'rebasing on arrival' (ROA) for people arriving in the UK.
Removing the harmful distortions created by the poor design of the UK's CGT should be a key focus of policy. This chapter sets out how the tax base could be reformed to greatly reduce – and in some cases largely remove – the distortions to saving, investment and risk-taking. With a reformed tax base, tax rates could be increased with much less distortion to choices over whether, when or how to invest. We summarise a 'big-picture solution' that involves reforming the tax base while aligning overall marginal tax rates across all forms of gains and income. We also discuss steps that could be taken towards this end goal and who would win and lose from reforms.
This briefing presents new research on the distribution of capital gains and characteristics of taxpayers who receive them. It contributes to the debate on Capital Gain Tax (CGT) reform by outlining who would be most affected by changes to this tax. We investigate this question using de-identified, confidential data accessed via HMRC, which provides information on all individuals with taxable capital gains from 1997 to 2020. We show that only 3% of adults paid CGT over the decade up to 2020. Most gains go to high income individuals, with almost half going to individuals earning above £150,000. More than half of all gains go to just 5000 people - 0.01% of the population - who receive £6.8m each on average. Gains are also geographically concentrated, with more gains in Kensington than all of Wales, and more gains in Hampstead than the entire North East. Notting Hill West - a neighbourhood of 6,400 people - received more in gains over a five year period than Liverpool, Manchester and Newcastle combined.
A. Advani and D. Sturrock (2024), A Wealth of Opportunities
We critically assess the main reliefs from inheritance tax, including agricultural property relief and business property relief, the exemption of pension pots from inheritance tax, and the design of the residence nil-rate band. We examine whether these aspects of Inheritance Tax are well-targeted and what reform might look like.
The IFS Green Budget Chapter looks at the effects of inheritance tax reforms on tax revenue and distributional outcomes. We begin by setting out the status quo position for inheritance tax, and the likely trends in the absence of reform. We highlight a number of problems with the current form of inheritance tax, and make recommendations for reform. We then provide static costings for these reforms, as well as for increasing or decreasing the scope of the tax. This includes the possibility of abolition. Finally we study who would benefit from these reforms, by wealth level of the person leaving the inheritance, by region of the country, and for recipients by wealth level of their parent.
The Register of Overseas Entities (ROE) was introduced by the government in Spring 2022 with the commitment that it would "require anonymous foreign owners of UK property to reveal their real identities". We use data released by Companies House and HM Land Registry to assess to what extent the ROE is currently delivering on this aim. We identify and quantify several major 'gaps' in the scope and operation of the register and make recommendations for how the register could be improved.
T. Pope, G. Tetlow and A. Advani (2023), Institute for Government
A key tenet of good policy making is use of the best available evidence. Tax is an important policy area, and one where a wealth of evidence – quantitative and qualitative analysis, and broader intelligence and insights – is generated by researchers, practitioners and officials. This report documents how different types of evidence feed into tax policy making. By highlighting the role evidence plays, and which types of evidence have an impact at different stages of the process, we aim to help external stakeholders to understand how the evidence they produce is used and how they could better feed into policy making. We also provide recommendations for how government can further shift its approach, already improved in recent years, to enhance the quality of the evidence base and to use this more effectively.
A. Advani, E. Chamberlain and A. Summers (2023), Tax Journal
A lively article in this journal asks the question 'Is now a sensible time to introduce a wealth tax in the UK?' Its subtitle contains the answer 'Not if Norway is any guide.' The search for international examples is a natural one, but it is also fraught with danger unless we try to understand the overall policy context. We explain why the example of Norway is not a lesson about modest tweaks to a wealth tax.
This short note summarises some key facts about non-doms, and explains the case for reform to the current regime. It first explains briefly what it means to be a non-dom, the tax advantages this can bring, the costs associated with use of these tax benefits, and past reforms to the regime. It then provides some key statistics on non-doms in the UK. Finally, we explain why the regime is in need of reform.
This CAGE Policy Briefing studies the offshore income and capital gains of the UK's 'non-doms' – individuals who are resident in the UK but who claim on their tax return that their permanent home ('domicile') is abroad. We use de-identified confidential data accessed via HMRC to analyse all individuals who have claimed non-dom status between 1997 and 2018. We show non-doms at least £10.9 billion in offshore income and gains. Most of these unreported income and gains (55%) belong to non-doms who arrived in the UK in the past five years. Looking at previous reforms that restricted access to the non-dom regime, we see these led to very little emigration. Those who did leave were paying hardly any tax. Consequently, abolishing the non-dom regime would raise at least £3.2 billion even after accounting for migration and other tax planning, and the loss of existing revenue from the remittance basis charge.
This CAGE Policy Briefing studies the UK's 'non-doms' – individuals who are resident in the UK but who claim on their tax return that their permanent home ('domicile') is abroad. We use de-identified confidential data accessed via HMRC to analyse all individuals who have claimed non-dom status between 1997 and 2018. We show non-doms are globally connected and economically elite: almost all were either born abroad or have lived abroad for substantial periods, and their incomes are very high. Non-doms are highly likely to work in finance and other 'City' jobs. They tend to come from Western Europe, India and the US. Within the UK they largely reside in and around London, although there are sizeable shares in Oxford and Cambridge, working in research and education, and in Aberdeen, working in oil.
This CAGE Policy Briefing studies the individuals who make up the UK's Sunday Times Rich List (STRL). These are the 1000 richest people or families with strong ties to the UK. We link together information in the STRL with multiple other data sources to analyse the foreign connections of STRL members, the industries with which they are associated, and their corporate ties to UK land and property. One in seven appear not to be UK resident for tax purposes. Among billionaires, one in seven are located in tax havens. Collectively they own almost £2 trillion in UK wealth.
This CAGE Policy Briefing studies alternatives to the government's new Health and Social Care Levy. Using publicly accessible tax data from HMRC, we find that removing the current National Insurance exemptions for investment income and people of pension age would raise £12 billion. This is the same amount of revenue as the Government is targeting from its new Levy. Equalising National Insurance on higher earnings with the rates already paid by lower earners could raise an additional £20 billion. This would be enough to fund a cut in the main rate of NICs by 1.25p, instead of raising these rates, as the government is planning. Under this alternative package of reforms, more of the revenue would come from London and the South East, and from older, wealthier individuals.
A thoughtful analysis appeared in this journal of our final report on a wealth tax for the UK. For a full discussion of the final report, we would refer readers to the frequently asked questions that deal with some of the misunderstandings that have emerged and the longer final report. However, we here respond to some specific points raised in the article.
This report presents the final findings of the Wealth Tax Commission into whether the UK should have a wealth tax. It concludes that if the government chooses to raise taxes in response to COVID, it should implement a one-off wealth tax in preference to increasing taxes on work or consumption.
Economists are central to policymaking in the UK, and to providing the research that underpins that policymaking. Despite having this important role in society, economists are not very representative of society, with a well-documented under-representation of women in the profession. In this briefing note, we examine the ethnic diversity of academic economists who provide much of the research that ultimately feeds into policymaking. We use data from the Higher Education Statistics Agency (HESA) to look at which groups are more or less well represented as academic economic researchers. We then examine economics students, to understand both the source of current under-representation and the prospects for change. Finally, we study some of the barriers faced by economics students.
This report introduces the UK Wealth Tax Commission, which will evaluate whether a wealth tax for the UK would be desirable and deliverable. To do this we have commissioned a series of Evidence Papers that will study each of the key issues in detail. In this report we set out initial evidence on what has been happening to wealth and wealth taxation in the UK. We examine the provisional case for a wealth tax, and map some of the difficulties in implementing it.
This CAGE Policy Briefing summarises new research on the taxes paid by the UK's richest individuals, using anonymised data collected from the personal tax returns of everyone who received over £100,000 in total remuneration (taxable income plus taxable capital gains). It shows how tax paid as a share of income or total remuneration varies across individuals. It shows effective tax rates are much lower than headline rates, regressive at high levels of income or remuneration, and vary by up to a factor of five across people with the same remuneration. An Alternative Minimum Tax of 35% could raise around £11bn, equivalent to 2p on the basic rate or 5p on both the higher and additional rates.
This CAGE Policy Briefing summarises new research on the impact of capital gains – which are excluded from existing income statistics – on measured inequality in the UK. It shows gains are highly concentrated, are persistent for a minority, and are rising. The richest have a larger share of total resources than previously thought, and it has been growing over time.
Capital gains (the profits from disposing of an asset for more than it was worth when you acquired it) are generally excluded from analysis of incomes in the UK, despite being a significant driver of some people's lifetime living standards. This Resolution Foundation Report looks at what we know about taxable capital gains; how our understanding of top income shares changes if we include capital gains in our analysis; and whether definitions of income used in official statistics should be changed or supplemented.
This SMF-CAGE Briefing Paper explains which types of individuals are most likely to be non-compliant on their tax returns, and what can be done to improve compliance and raise tax revenue.
This IFS Briefing note uses data from HMRC's random audit programme to show which types of people are more likely to be under-reporting taxes and how their behaviour changes after a tax audit. The results are based on data from audits covering tax returns for the years 1999–2009.
The report analyses and assesses: the rationale and objectives of energy policy; the current policy landscape faced by UK energy users; how current and future policy has led to inconsistencies in the implicit carbon prices faced by different users; and potential ways in which to improve policy affecting domestic and business energy users.
Government wants both to reduce carbon emissions and to reduce 'fuel poverty'. Energy prices have risen in part because of a multitude of policies aimed at reducing emissions. There are also multiple policies aimed at ameliorating these effects. Altogether, this leads to a complex policy landscape, inefficient pricing and opaque distributional effects. In this report, we show the effects of energy price rises over the recent past, look at what current policies mean for effective carbon prices and their impact on bills, and consider the distributional consequences of a more consistent approach to carbon pricing, alongside possible changes to the tax and benefit system that could mitigate these effects.
The latest statistics on Household Total Wealth in Great Britain from the ONS are a welcome but limited insight into what has been happening to wealth in Great Britain. Limitations in survey response means they will underestimate the share of wealth at the top. While they will not tell us what has happened as a result of the pandemic, we can use them to provide an educated guess.
In the wake of last summer's Black Lives Matter protests, many have asked themselves what they are doing to tackle racial injustice. For economists, one central question is the extent to which the profession has examined the causes and consequences of racial inequality. This column reports evidence that race-related research in economic journals constitutes a far lower share than in comparable publications in sociology and political science. What's more, economists over-estimate the extent of race-related research done by the profession. Understanding why economists produce so little race-related research is essential if the discipline is going to be able to reform.
The gender pay gap opens up immediately after graduation, with male graduates earning 5% more than female graduates on average at age 25. Ten years after graduation – before most graduates start having children – the gender pay gap stands at 25%. Most of the initial gap can be explained by university subject choices, with women less likely to study subjects that lead to high-paying jobs.
A. Advani, S. Sen and R. Warwick (2021), IFS Observation
The economics profession – and the current student population studying economics – is not representative of society, with women, some ethnic minorities, and state school students underrepresented. While more than 7% of private school boys doing an undergraduate degree were studying economics in 2018/19, less than 1% of state school girls were. We highlight that interventions aimed at changing this picture need to consider the choices students make early on in their educational career.
A. Advani, F. Koenig, L. Pessina and A. Summers (2020), VoxEU
Top incomes have grown rapidly in recent decades and this growth has sparked a debate about rising inequality in Western societies. This column combines data from UK tax records with new information on migrant status to show that migrants are highly represented at the top of the UK's income distribution. Indeed, migration can account for the majority of top-income growth in the past two decades and can help explain why the UK has experienced an outsized increase in top incomes.
A. Advani, D. Prinz, A. Smurra and R. Warwick (2021), IFS Observation
Carbon pricing will be one of the most talked about policy options at COP26. The idea of carbon pricing is that putting a price on the emission of greenhouse gases (GHGs) to reflect the social costs of climate change should provide producers and consumers with strong incentives to reduce such emissions. In this observation, we consider the opportunities and risks from introducing carbon taxes in developing countries, with reference to Ethiopia and Ghana as case studies.
The future of UK economics is looking predominantly male and disproportionately privately educated. This column introduces #DiscoverEconomics – a campaign to increase diversity in economics led by the Royal Economic Society. The campaign aims to attract more women, ethnic minority students, and students from state schools and colleges to study the subject at university.
