As it stands today, HM Revenue & Customs (HMRC) finds itself at the centre of a crisis – trust, transparency, and competence. Once regarded as a quiet cog in the machinery of government, HMRC has become a lightning rod for frustration. System outages, rising penalties, hidden security breaches, and deteriorating service levels are eroding public and business confidence.

At the same time, the government urgently needs to raise revenue. However, without effective leadership and functioning systems, HMRC has leaned on aggressive enforcement, targeting small businesses, sole traders, and self-assessment filers with retrospective demands, escalating penalties, and minimal support.

Yet amid this dysfunction, some in the industry are turning to alternative ideas being discussed beyond government. Chris Wilkins, Managing Partner at Wilkins Southworth, has recently examined several of these controversial proposals in his YouTube videos, not to advocate for them, but to illustrate how radically the tax landscape might shift. 

What’s emerging from industry observers is not consensus, but concern: if sacred tax exemptions are now on the table, what could come next?

A £47 million breach and a worrying silence

Earlier this year, HMRC confirmed that £47 million was lost to a phishing scam in which organised criminals used stolen personal data to fraudulently claim PAYE refunds. We now know that approximately 100,000 accounts were compromised.

But the scandal deepened not with the breach but with what followed. HMRC failed to notify Parliament for months, prompting widespread criticism. Treasury Committee members were stunned to learn of the delayed disclosure, raising serious questions about HMRC’s internal governance and accountability.

Although no individual taxpayers were left out of pocket, the reputational damage was severe. This incident has become emblematic of a much deeper systems problem for an organisation tasked with protecting vast financial data.

Collapsing customer service and public frustration

Unfortunately, the breach was not an isolated issue. HMRC’s phone lines went offline in May (and early June) following a major technical failure. It was a time when many taxpayers and professionals relied on support to resolve outstanding issues from the previous tax year. 

This is part of a broader pattern of continuing service disruptions. The timing was especially damaging given HMRC’s ongoing push to move taxpayers toward fully digital reporting. 

When online systems fall short, and phone support collapses, the result is confusion, delays, and rising frustration among those simply trying to comply. Even when operational, performance remains dismal:

• Only 66.4% of calls were answered in 2023/24 – far below HMRC’s 85% target.
• Average wait times now exceed 23 minutes.
• Digital channels are often unusable for more complex or urgent issues.

To be blunt, these failings are not trivial. Taxpayers face delayed refunds, erroneous tax codes, unresolved penalties, and months of administrative limbo. Businesses report severe disruptions, particularly in areas such as VAT and payroll compliance. Many accountants now describe HMRC as a “barrier” rather than a support.

A culture of enforcement without support

Recently, HMRC has adopted an increasingly aggressive tone when collecting new taxes, despite billions of pounds in outstanding taxes from years past. Rather than targeting systemic evasion or simplifying compliance, it has focused on retrospective investigations, penalty-heavy correspondence, and tight response windows.

Sole traders, landlords, and self-employed workers often bear the brunt. Many report sudden demands for backdated payments, sometimes spanning years, with little explanation or context.

While enforcement is a necessary part of any tax regime, overreliance on punitive tactics – especially amid institutional breakdown – risks eroding voluntary compliance altogether.

Rethinking revenue: What could be on the table next?

Against this backdrop of failure and frustration, independent experts – including Chris Wilkins of Wilkins Southworth – have been examining alternative paths now under potential discussion. His recent YouTube videos explore systemic changes that, while controversial, are being floated as ways to raise significant revenue without resorting to coercive tactics or destabilising public trust.

These are not recommendations from Wilkins Southworth, but rather examples of once-taboo policies now entering serious discussion.

1. Lowering the VAT registration threshold

• Current threshold: £90,000.
• Potential change: Reduce to £45,000.
• Estimated revenue: £1 billion.

The UK’s VAT threshold is the highest in Europe. Lowering it would bring thousands more small businesses, like consultants and tradespeople, into the VAT net, expanding the base and reducing the need for high marginal rates.

Some argue that the compliance burden is now lower due to the widespread use of digital accounting tools. For context, many countries, such as Spain, operate with no VAT threshold at all, raising questions about whether the UK’s generous limit can persist.

2. Capping the tax-free pension lump sum

• Current rule: 25% of pension pots – up to £268,275 – can be taken tax-free.
• Potential change: Cap this at £100,000.
• Estimated revenue: £2 billion.

This idea, if implemented, would primarily affect high earners with large pension pots, while preserving the tax-free benefit for most savers. It’s one of several proposals that were once considered politically untouchable, now being openly debated as potential sources of revenue.

3. Removing the CGT spouse exemption on death

• Current rule: Spouses inherit assets at uplifted value, avoiding CGT.
• Potential change: End the exemption for inter-spousal transfers on death.
• Estimated revenue: £1.6 billion.

One example often cited is how some wealthy couples currently pass property through both estates to children without triggering CGT. Critics argue that closing this gap could bring more parity across taxpayers and simplify the inheritance tax landscape.

Why are these ideas now plausible?

Previously, reforms like these were considered politically toxic. But several key trends now make them more plausible, and increasingly part of mainstream policy discussions:

1. Public tolerance for unfair tax breaks is declining

The pandemic, rising property prices, and benefit freezes have heightened awareness of inequality. There’s growing support for closing loopholes that primarily benefit the wealthy.

2. Technology reduces compliance barriers

Cloud accounting, real-time reporting, and digital payroll make VAT and pension tracking easier than ever, mitigating the burden on small businesses.

3. The alternative is worse

Without structural reform, HMRC will keep squeezing the same taxpayers with penalties, audits, and retrospective charges, widening the gap between taxpayers and the state.

Reform first, revenue later

HMRC must first repair its operational credibility for any tax changes to succeed, which means:

• Investing urgently in modern IT infrastructure
• Creating a public, binding protocol for data breach disclosure
• Restoring full helpline capacity and service performance
• Ending the disproportionate use of enforcement letters over support

Only then will the public believe that reforms are about fairness, not fiscal desperation.

Conclusion: Fix the system, then talk about tax

HMRC faces a crisis of confidence, with failing service standards, data breaches, and an aggressive enforcement culture straining public trust just as the government seeks to raise more revenue.

That’s why some in the tax and accounting sector, including Chris, have drawn attention to the kinds of proposals now entering policy discussions. These aren’t sweeping reforms, but rather examples of targeted adjustments – like lowering the VAT threshold or revisiting pension and CGT reliefs – that are increasingly viewed by policymakers as potential revenue sources.

However, even debating ideas like these requires a system that is functional and trusted. Before asking more of taxpayers, whether through reform or enforcement, HMRC must fix its own house: restoring service levels, transparency, and credibility. Only then can any serious tax discussions take place in a climate of consent rather than conflict.

If you require advice about your tax status or have an ongoing issue with HMRC, please contact the team today to discuss your options.