Centax urges £26bn tax raid on high earners ahead of Budget

Millions of taxpayers face a heavier financial burden as the government moves to tackle the cost of living through a major package of revenue-raising measures. Chancellor Rachel Reeves unveiled a sweeping fiscal plan featuring billions in tax rises, alongside a controversial decision to scrap the two-child benefit cap. The announcements follow intensive policy pressure from Academics Urge Burnham And Healey To Launch £26bn Tax Raid On High Earners, highlighting deep divisions over how to target wealth and protect public services.

The debate surrounding high earners intensified when researchers at Centax—consisting of academics from the London School of Economics and Warwick University—published proposals arguing that reforms could raise £26bn. According to City AM, the plan seeks to address tax imbalances between salaried employees and top earners with diverse income streams. Arun Advani, director of Centax and professor of economics at Warwick, argued that the changes would encourage workers to be more productive rather than chase low rates.

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While we don’t take a view on what the government should do with any additional revenue raised through these reforms, not doing them means limiting growth while having to raise the same money elsewhere, Advani said via City AM.

The academic proposals call for capital gains taxes to be equalised with income tax rates, raising an estimated amount by 2030. Researchers also suggested applying employer national insurance contributions on partnership profits at limited liability partnerships, and extending Class 1 NICs to investment income from rent, savings, and non-dividend investment income. Findings showed that among the top 0.01 per cent of high earners, just one in ten pays close to the headline rate, while a quarter pay significantly less.

Not everyone agrees on the efficacy of these measures. Top economists including Jim O’Neill and Andy Haldane warned that changes to capital gains and investment taxes could damage growth. Paul Johnson, former boss of the Institute for Fiscal Studies, dismissed claims that higher capital gains taxes would increase government receipts as nonsensical, warning it could cost the Treasury in lost revenue. Robert Salter, director at tax advisory Blick Rothenberg, noted that extending NICs to self-employed partners could tax them more punitively than regular employees.

In her Budget speech covered by the BBC, Rachel Reeves defended her strategy, stating she was asking ordinary people to pay a little bit more while placing the heaviest burden on those with the broadest shoulders. The Chancellor extended a freeze on tax thresholds, a move calculated to drag millions into paying more tax. Almost one in four taxpayers will pay some tax at the higher rate by 2031, according to calculations by the Office for Budget Responsibility.

The OBR forecast rollout descended into chaos when key details leaked online minutes before the speech. Reeves called the early release deeply disappointing and a serious error, prompting the watchdog to launch a formal investigation into the technical failure. Meanwhile, government borrowing costs eased and the pound strengthened following an initial sell-off.

Political reaction was swift and fierce. Conservative leader Kemi Badenoch claimed the Budget represented a total humiliation for the Chancellor and called for her resignation, accusing Labour of breaking promises on taxation. Liberal Democrat leader Sir Ed Davey argued the package failed to tackle the cost of living crisis, while Reform UK leader Nigel Farage described it as an assault on aspiration and saving. The Green Party criticized the government for squeezing struggling households while letting multimillionaires off the hook, and Scottish representatives complained that funding uplifts failed to cover rising employer national insurance costs.

As Westminster digests the fallout from the fiscal event, attention turns to how these tax adjustments and benefit overhauls will play out across the wider economy.