This week’s stories point to a shift in where pressure is building across the UK economy.
There’s a longer-term question around how artificial intelligence could reshape taxation entirely, while in the short term, policy changes are already influencing business behaviour.
At the same time, the broader economic picture looks less stable once you look past the headline data.
Read on for the full context.
There’s a growing argument that income tax, as we know it, may not hold up in an AI-driven economy. Tom Blomfield, founder of Monzo, suggested this week that within five years, it could become largely redundant.
The reasoning comes down to employment. If AI systems replace a meaningful share of human labour, then a tax system built on wages starts to break down. Governments would need to find alternative sources of revenue.
Blomfield’s view is that taxation could shift towards “compute” - essentially the infrastructure behind AI, like data centres. And actually, that’s not far off what others are suggesting. OpenAI has already discussed the idea of taxing automated labour or increasing reliance on capital-based taxes.
The scale of that shift would be significant. Right now, income tax and National Insurance make up around 42% of UK government revenue, while taxes on assets like shares and property account for just 4%.
You can already see early signs of disruption. According to Adzuna, entry-level job postings have fallen by 35% since late 2022, around the time ChatGPT launched. That doesn’t prove causation, but it does show where pressure is starting to appear.
What this means for investors
“I don’t think we’ll tax human labour, we’ll tax compute… and then we will use the proceeds to pay for government.”
At the same time as those longer-term discussions, current tax policy is already affecting behaviour.
Jo Bamford has said JCB could relocate to the US in response to new inheritance tax rules. The policy introduces a 20% tax on business assets above £2.5m when passed down through generations.
On paper, the threshold was increased from £1m to protect more businesses. But in practice, larger family-owned firms are still exposed, and that’s where the reaction is coming from.
Businesses may need to plan for liquidity events, reduce reinvestment, or restructure ownership to manage future liabilities.
This isn’t happening in isolation either. It follows the removal of the non-dom status, which has already led to concerns about wealth leaving the UK.
You can see how this connects back to the previous section. If capital becomes more mobile and tax pressure increases, relocation becomes a realistic option rather than a theoretical one.
Key conclusions
“You want us… to invest here in Britain… but there’s only so much you can ultimately do.”
These individual policy changes sit within a much broader trend.
According to the IMF, the UK’s tax burden is set to rise from 37.6% of GDP in 2024 to 42.1% by 2031. That’s the largest increase among advanced economies and the highest level in peacetime. To put that in context, the average increase across similar economies is just 0.9 percentage points.
The UK is expected to rise by 4.5.
That gap matters, as, of course, changes how competitive the UK looks from a capital allocation perspective. At the same time, growth expectations are weakening. The IMF now forecasts UK growth at just 0.8%, partly due to rising energy costs and external pressures.
Higher taxes, slower growth, and pressure on energy costs all feed into each other.
There’s also a policy question around where the additional tax revenue is going. Some criticism has focused on rising welfare spending, while investment in areas like energy production remains constrained. A key area where money is being spent is debt interest payments - central government debt interest payable in February 2026 was £13.0 billion, £5.5 billion more than in February last year.
How this may effect investors
"The IMF data is straightforward - the UK is increasing its tax burden faster than any comparable economy."
The latest GDP figures suggest the UK economy grew by 0.5% in February, well ahead of expectations.
On the surface, that looks like quite positive signal. Growth was broad-based, with services and production both rising, and construction up by 1%. However, this data reflects conditions before the escalation of conflict in the Middle East.
Since then, the outlook has shifted. Energy prices have increased, inflation expectations have risen to around 3.3%, and the Bank of England is now less likely to cut rates.
You can see the disconnect. The data shows strength, but, unfortunately, the forward-looking indicators are now pointing in a different direction.
The labour market adds to that picture with unemployment moving above 5%, suggesting underlying softness despite the previous growth figure.
“While the February numbers would suggest we’re in a strong position, actually, the situation on the ground is probably not quite like that.”
There isn’t a single dominant theme this week, but there is a clear direction of travel.
Tax pressure is increasing, growth expectations are softening, and early signs of structural change are starting to appear. How those play out together will matter more than any one data point.