Income tax as we know it could become obsolete within five years, according to Tom Blomfield, founder of digital bank Monzo. With advancements in artificial intelligence (AI), the traditional reliance on taxing human labor may soon be a thing of the past.
Blomfield argues for a shift towards taxing computational infrastructure instead of human workers. “I don’t think we’ll tax human labour, we’ll tax compute, [meaning systems like] data centres, and then we will use the proceeds to pay for government,” he stated. This perspective aligns with the growing capabilities of AI systems, which are increasingly outperforming humans in specific tasks.
As AI technology continues to evolve, it is expected to become generalizable by the end of 2026. Currently, these systems are already demonstrating capabilities beyond that of university professors in narrow domains. “These tools are performing beyond university professor level – they are actually beating humans in narrow domains,” Blomfield noted.
The implications of these advancements are significant for the UK government, which currently derives 42% of its revenue from income tax and National Insurance. In contrast, capital-based taxes contribute a mere 4% to government revenue. This disparity raises questions about the sustainability of the existing tax structure in an increasingly automated economy.
Moreover, the rise of AI has already begun to impact the job market, with advertisements for entry-level positions plummeting by 35% since the launch of ChatGPT. Morgan Stanley has warned that the UK could face an AI-driven employment crisis more acutely than other nations, highlighting the urgency of rethinking taxation strategies.
As automation replaces workers, the Labour Party government may need to consider levying taxes on computing power to sustain public services. The potential for a fundamental change in HMRC income tax is looming, with some observers suggesting that the biggest overhaul could occur within five years.
While the future remains uncertain, the conversation around Monzo income tax and AI’s role in reshaping taxation is gaining momentum. Details remain unconfirmed, but the trajectory suggests a significant transformation in how governments will fund their operations in an AI-driven world.