Labour warned tax system is

A new Policy Exchange report calls for major tax reforms including the abolition of inheritance tax and National Insurance

Former economic advisor to Baroness Thatcher Patrick Minford analyses the impact of the UK tax burden being set to hit a record 38.5% of GDP by 2030-31, adding ‘business is in despair.’

A new Policy Exchange report calls for major tax reforms including the abolition of inheritance tax and National Insurance

A new report backed by former chancellor Sajid Javid is calling for a sweeping overhaul of Britain's tax system, including the abolition of inheritance tax, Stamp Duty and National Insurance contributions.

The report, published by Policy Exchange and written by economist Roger Bootle, argues the UK's current tax system is holding back economic growth and requires fundamental reform.

The paper comes as Andy Burnham prepares to enter Downing Street following Labour's election victory.

According to the report, the UK tax system suffers from four key weaknesses: a high overall tax burden, marginal tax rates that discourage work and investment, taxes that damage economic growth and an increasingly complex system that imposes costs on businesses, households and Government.

Among its recommendations are the abolition of Stamp Duty on property purchases and share transactions, inheritance tax and the additional 45 pence rate of income tax.

The report also proposes phasing out National Insurance contributions for both employers and employees over time.

Policy Exchange said these tax reductions could be funded through lower public spending as a share of the economy and by extending the standard rate of VAT to goods and services that are currently zero-rated or subject to reduced rates.

The think tank also argued that broadening the VAT base could remove some of the tax system's most economically damaging distortions without necessarily reducing overall tax revenues.

In the foreword, Sir Sajid Javid said Britain's tax burden had reached its highest level for 70 years.

He wrote: "The tax burden now stands at a seventy-year high."

Sir Sajid said the interaction of tax allowances, tapers and benefit withdrawals had created a system in which effective marginal tax rates can increase sharply as earnings rise.

He wrote: "Workers sometimes face effective rates of more than 100 per cent. There are many instances in Britain today where working for a payrise, or putting in a few extra hours, will leave you materially worse off."

The former chancellor also criticised the complexity of the UK's tax code.

Sir Sajid wrote: "Complexity is not just a harmless inconvenience. It's an additional tax in its own right - on enterprise, on time and on the public's perception of the whole system."

The report said tax receipts are forecast to reach 36 per cent of gross domestic product during the 2025/26 financial year, above the OECD average of 34 per cent.

It also highlighted that people earning between £100,000 and £125,140 face an effective marginal income tax rate of 62 per cent because of the withdrawal of their personal allowance.

For some graduates repaying student loans, the report said the effective marginal rate can rise to 71 per cent.

It added that some taxpayers can face effective rates of more than 100 per cent because of the interaction between taxes, benefits and allowance withdrawals.

According to the report, the UK's tax legislation has expanded from 1,626 pages in 1976/77 to 23,522 pages today.

It also said HM Revenue and Customs spent £6.6billion collecting tax during 2024/25, while tax compliance costs small and medium-sized businesses an estimated £25billion each year.

The first phase of the report would remove some of the highest marginal tax rates and Universal Credit withdrawal rates, funded by extending the standard 20 per cent VAT rate to items that are currently exempt or charged at reduced rates.

Its second phase would abolish the additional 45 pence income tax rate, inheritance tax and tariffs, funded through lower public spending as a proportion of gross domestic product, while increasing defence spending.

The final phase would see National Insurance contributions abolished entirely, with the report arguing this would require public spending to fall to 33 per cent of gross domestic product alongside higher defence expenditure.