Extract C

Alternative strategies for raising UK tax revenue

There are several proposed alternative strategies for raising additional tax revenue in the UK to fund public services and manage national debt:

• Freezing income tax thresholds (fiscal drag): Freezing the personal allowance and higher-rate thresholds rather than raising them in line with inflation. Economists estimate this "stealth tax" could raise over £8 billion annually by 2026 as wage growth drags more workers into higher tax brackets.
• Aligning Capital Gains Tax (CGT) with Income Tax: Currently, taxes on profits from selling assets (10% to 28%) are significantly lower than income tax rates (up to 45%). Equalising these rates could generate an estimated £14 billion a year, though critics argue it might discourage investment and entrepreneurship.
• Expanding environmental taxes (e.g., a Carbon Tax): Introducing an economy-wide carbon tax on fossil fuels and emissions. This could raise £10 billion initially while helping the UK meet its net-zero targets, but it could prove highly regressive by disproportionately affecting lower-income households' energy bills.