Guest blog - Tax is not a burden the view from the Women's Budget Group

At the Women's Budget Group, we argue that tax should be viewed not as a burden but as a means to build a more equal society. Progressive taxation allows everyone to contribute their fair financial share to a well-functioning society. Such a society requires an adequately funded social security system and a robust social infrastructure for the collective provision of health, adult social care, education and childcare.

A well-functioning society requires not only financial contributions but also care for its people. Women, who provide most unpaid care, tend to do less paid work, earn less, and accumulate less wealth than men. As a result, they rely more on public services and social security. Taxes and public expenditure are crucial in redistributing resources and tackling gender inequalities.

As women joined the labour force, little of the additional revenue they generated was invested in replacing the care they previously provided in the home. Instead, much of it was given away in income tax cuts, while public services were allowed to decline. Because public services are labour-intensive, they have become relatively more expensive as wages have risen, but that doesn't make them unaffordable. We can afford any of the services that we could in less affluent times. However, making the case for additional public expenditure is hard when overall inequality levels are high, so most people feel badly off.

The UK's income inequality is much higher than in the 1960s and 70s. The share of income the top 1% received grew significantly in the 1990s and 2000s^[1]. In 2022/23, a person with a high income (at the 90th percentile of the income distribution) earned four times as much as someone at the bottom (10th percentile). In 1977, the ratio was 3.2^[2].

Wealth inequality in the UK declined during the 20th century, only to reverse in recent decades^[3]. The wealthiest 10% hold around half of all wealth in Great Britain, with the wealth gap between rich and poor households widening substantially. The UK has the second-highest wealth disparity in the OECD^[4]. Wealth inequality in the UK is almost double that of income inequality^[5].

This growing wealth inequality also has a gendered dimension. On average, women hold £100,000 less in wealth than men^[6]. But it's not only about the amount—what they own also differs. Women's wealth is mostly held in property and physical wealth, often shared with other household members, while more than 60% of men's wealth is held individually as private pensions and financial wealth^[7].

The highly unequal distribution of wealth and income in the UK leaves scope for tax reforms to raise revenue without hurting the poorest. By increasing spending on public services and social security, such reforms could also help tackle gender inequalities and, in so doing, would also reduce overall income and wealth inequality.

We believe a fundamental overhaul of our tax system is essential, which should go beyond merely adjusting existing tax rates. Current government commitments not to change key tax rates have led to rigid policymaking, prioritising past promises over adapting to evolving economic conditions. Reform should also address tax allowances. It is inconsistent that allowances are not subjected to the same level of evaluation as other forms of expenditure.

A broader, more imaginative, progressive approach is needed to reshape the system. Here are key elements of our recommendations for creating a fairer, more effective tax system:

The taxation of wealth and income derived from wealth: In the UK, wealth itself is not directly taxed, and income derived from wealth—such as capital gains and dividends—is generally taxed at lower rates than income from employment. This structure deepens existing inequalities and gender gaps. Other countries, notably Spain and Switzerland, have wealth taxes. A wealth tax of 2% on assets over £10 million could raise up to £24 billion a year^[8].

Equalising the taxation of different forms of income, including capital gains, would create a fairer system that does not reward ownership over work. A comprehensive reform of Capital Gains Tax could raise £14 billion per year^[9] and reduce opportunities for tax avoidance, particularly for those who use companies to convert income into gains.

Inheritance Tax: The Inheritance Tax structure, with its many allowances and reliefs, restricts social mobility^[10]. Tax reliefs concentrate inherited wealth, as does the forgiveness of Capital Gains Tax (CGT) at death. It is only fair that those fortunate enough to inherit wealth make a progressive contribution to society from that inheritance. In the longer run, the system of Inheritance Tax should be reformed so that lifetime receipts, rather than bequests, are progressively taxed. This would close loopholes for tax avoidance and incentivise the distribution of wealth to more recipients.

Pension tax allowances: Tax relief on contributions to private pensions is designed to encourage saving. However, it is massively regressive and gender unequal, benefiting those with higher incomes—mostly men —who pay higher taxes, while lower earners receive less.^[11] This contributes to the gender pension gap, which currently stands at 35% for those around the normal minimum pension age^[12] — seven times higher than the gender pay gap^[13].

It would be much fairer if any tax relief was restricted to basic rate tax and made available to non-income taxpayers. It would be even fairer if the money spent on pension tax relief, which cost £48.7 billion in 2022 to 2023 for pension Income Tax and NICs relief^[14], were instead spent on increasing the state pension. A million more women than men receive the state pension^[15], and it is the only income many older women have.

Property tax: Tax reliefs and the promise of investment gains on buying property have diverted funds away from more productive investment, left a third of homes under-occupied and raised house prices beyond the reach of most women^[16]. Instead of our highly regressive council tax system, based on outdated property values, a well-designed property or land value tax would raise revenue, free up under-occupied housing and make housing affordable to more people.

National Insurance: Despite those receiving income from wealth being eligible for nearly all the same services and benefits funded by National Insurance, they do not pay National Insurance contributions on that income. Furthermore, the structure of National Insurance contributions is highly regressive, with an upper earnings limit above which the rate of payments drops substantially. National Insurance needs urgent reform so that it is progressively levied on all incomes.

Income tax: Successive governments have tinkered with income tax rates and thresholds in contradictory directions, resulting in a system that creates perverse incentives. With so few bands, income tax is easily politicised, making it difficult for policymakers to implement sensible changes. Our income tax system could be made more progressive by having steadily increasing rates over more bands (or a continuous schedule of slowly rising rates).

Independent taxation: The principle that one spouse's taxation should not depend on the income of the other was a significant victory for women, preventing them from being taxed at rates based on their spouse's (usually) higher incomes. This principle is breached by the marriage tax allowance, which gives an extra allowance to the spouses of very low earners, and the high-income child benefit charge, which recoups any Child Benefit paid to anyone in the household from a higher-rate taxpayer. Both measures should be abolished.

The tax system needs substantial reform to make it more progressive and inclusive, and to challenge the view of tax as a burden. Ensuring that wealthy individuals and large corporations pay their fair share, and reducing the allowances by which tax can be avoided, could raise much needed additional revenue. This could be invested in enabling our social security system and public services to improve people's lives and challenge gender inequalities.

The CIOT publishes guest blogs to stimulate debate on tax policy and related matters. The views expressed in guest blogs are those of the writers and are not necessarily shared by CIOT.

_References:

_{1 B. Francis-Devine (2024) Income inequality in the UK. House of Commons Library.}

_{2 ONS (2024) The effects of taxes and benefits on household income, disposable income estimate. Financial year ending 2023 edition, Table 10. P90/P10 ratio.}

_{3 A. Advani, G. Bangham and J. Leslie (2021) The UK's wealth distribution and characteristics of high-wealth households}

_{4 Fairness Foundation (2024) Wealth Gap Register.}

_{5 Resolution Foundation (2017) The generation of wealth.}

_{6 ONS (2022) Distribution of individual total wealth by characteristic in Great Britain: April 2018 to March 2020.}

_{7 WBG (2023) Why taxation of wealth is a feminist issue. A gendered analysis of wealth in Great Britain.}

_{8 Tax Justice UK (2025) How to raise £60 billion for public services: our ten tax reforms.}

_{9 CenTax (2024) Reforming Capital Gains Tax: Revenue and Distributional Effects}

_{10 Advani & Sturrock (2023) Reforming inheritance tax, IFS}

_{11 HMRC (2024) Income Tax payer numbers by type; Private pension statistics commentary: July 2024}

_{12 ONS (2023) The Gender Pensions Gap in Private Pensions.}

_{13 The gender pay gap in April 2024 was 7%. ONS (2024) Gender pay gap in the UK: 2024}

_{14 HMRC (2024) Private pension statistics commentary: July 2024}

_{15  Stat-Xplore (2024) State Pension – Data from May 2018. Data for August 2024.}

_{16 Josh Ryan-Collins  (2024)The demand for housing as an investment: Drivers, outcomes and policy interventions to enhance housing affordability in the UK UCL Institute for Innovation and Public Purpose, Policy Report.}