If Labour can’t cut taxes it could at least make them simpler
Britain’s tax code is now among the most complicated in the world and businesses are left grappling with arbitrary distinctions that consume time and money. The King’s speech is a chance to reset the conversation, says Alan Vallance
Ahead of the King’s Speech, the government faces a stark choice. It can continue layering new rules and reliefs onto an already tangled tax system, or it can confront the complexity that businesses across the country are warning is holding back growth.
ICAEW’s latest polling found that from a list of five options, nine in 10 of the chartered accountants we asked would support legislation to simplify the UK’s complicated tax system. These are the professionals working with businesses every day, from start-ups and SMEs to major employers – 84 per cent of FTSE 100 companies have an ICAEW member on their board. Our members tell us that doing business is too difficult, too expensive and too uncertain, and these are the barriers the government needs to tackle to enable the conditions for growth.
Britain’s tax code is now among the most complicated in the world. It has built up gradually over decades, through successive governments adding new exemptions, thresholds, reliefs and temporary fixes without stepping back to consider the wider picture.
Businesses are left grappling with arbitrary distinctions that consume time and money. We have all seen examples of costly disputes over whether certain food items such as giant marshmallows should be zero-rated or standard-rated for VAT. These cases may sound amusing, but they represent something more serious: wasted time, administrative burden, costs and uncertainty that distract from the pressing task of growing the economy.
We have all seen examples of costly disputes over whether certain food items such as giant marshmallows should be zero-rated or standard-rated for VAT. These cases may sound amusing, but they represent something more serious: wasted time, administrative burden, costs and uncertainty that distract from the pressing task of growing the economy
The same is true across employment taxation. Businesses frequently face confusion over employment tax status rules when taking on staff or contractors, increasing both compliance costs and legal risk. The latest example was the first-tier tribunal decision of 1 May 2026 which ruled that football referees were not employees for tax or national insurance purposes, ending almost a decade of litigation which went up to the Supreme Court before coming back down to the tribunal to decide the matter. At a time when the UK is struggling with productivity and labour market participation, these distortions matter.
This comes at a particularly difficult economic moment. ICAEW’s latest Business Confidence Monitor found sentiment remained in negative territory held back by the geopolitical instability and escalating energy costs caused by the Iran war weighed on business outlooks.
Negative confidence readings are not abstract statistics. They typically coincide with periods when businesses delay investment, hold back recruitment and become more cautious about expansion. Against that backdrop, government should be looking for every opportunity to send clear pro-growth signals to the business community, particularly as it considers the results of the local elections and searches for solutions to unlock the economy and voter confidence.
Tax simplification offers precisely that opportunity.
A simpler system would bring substantial benefits. Simplifying VAT by broadening the base would ultimately raise revenue that could be used to lower more damaging taxes, such as employer’s NIC. And it would produce more predictable revenue, giving the Chancellor more flexibility to respond to fiscal pressure or deliver policy priorities.
Boost investment, reduce uncertainty
Beyond the Exchequer, the gains would be felt across the economy. A simpler system would boost investment, by reducing the uncertainty premium that businesses currently price into decisions about whether and where to commit capital. It would expand capacity at HMRC, freeing resource currently spent administering and policing reliefs to focus on tackling avoidance and supporting compliant taxpayers. And it would strengthen the UK’s international competitiveness – for mobile investment, the simplicity of a tax system can often matter more than its headline rates.
There are practical steps government could take immediately. A commitment to a long-term tax simplification roadmap would provide businesses with greater certainty over the direction of travel. Streamlining VAT rates and reducing unnecessary anomalies would cut disputes and compliance costs. Reviewing cliff edges across the tax system could remove disincentives to work, invest and grow. Greater clarity around employment status would support businesses to hire with confidence.
Simplification must also look ahead to the future economy, and so as AI and automation reshape industries, government will need to think carefully about how the tax base evolves.
The King’s Speech offers ministers the opportunity to reset the conversation.
If the government is now serious about growth then it cannot afford to ignore the growing consensus from business and the accountancy profession. Britain’s tax system has become too complicated, and the cost of inaction is too great.
Alan Vallance is CEO of the Institute of Chartered Accounts in England and Wales (ICAEW)