How likely is a wealth tax in the UK?

Government, the key decision maker, has said it is opposed to a new wealth tax and focus is currently elsewhere.

A wealth tax is "un-Conservative" – Rishi Sunak, January 2021.

More detail:

• Rishi Sunak, Chancellor of the Exchequer, has previously made clear in Parliament that he opposed a wealth tax – stating in summer 2020 that he did "not believe that now is the time, or ever would be the time" for a wealth tax – but he has clearly not ruled out increases to existing taxes such as capital gains tax and inheritance tax.
• Since May 2021, rumours have been circulating that the Chancellor is considering raising inheritance tax, with Treasury sources stating that such an inheritance tax increase could be "presented" as a wealth tax.
• Capital gains tax is also evidently in the Chancellor's sights. An independent report by the Office for Budget Responsibility (OBR) had given the Chancellor an element of political cover to make changes to capital gains tax reliefs and rates at a future budget – a key question being whether the capital gains tax rate on returns on many investments (typically at 20%) will be harmonised to rates of tax that apply to income from other sources (taxed at up to 45%) and, if so, whether indexation or taper relief might be reintroduced.

Public scrutiny of the wealthy and reports on wealth inequality seem to be on the rise. Calls for a wealth tax are steadily growing.  

"Jeff Bezos’s space adventure is a sign that the time for a wealth tax has come" – Editorial piece in the Independent, June 2021.

"A wealth tax is necessary but not sufficient" – Editorial piece in The Guardian, July 2020.

More detail:

• #wealthtax appears to be gaining an element of traction both in the UK and worldwide, buoyed by increasing calls for a wealth tax in the US. 
• If economic headwinds continue to grow and hardship is felt by increasing numbers, then pressure from the press and public opinion may become harder for the government to ignore.

Many other countries in Europe have already had and later abolished a wealth tax, though some still remain. Argentina introduced a one-off levy in December 2020. In the USA, calls are currently increasing for one.  There is no co-ordinated international push for a wealth tax from influential international organisations such as the OECD, which is broadly neutral on wealth tax. 

Only a handful of OECD countries (namely Switzerland, Spain and Norway) currently operate some form of net wealth tax applying to more than a single type of asset.

More detail: 

• Focus instead remains for now on international co-ordination and reporting – projects such as Base Erosion and Profit Shifting (including the Common Reporting Standard and Model Mandatory Disclosure Rules) and, more recently, the 15% 'global minimum' corporate tax rate.
• The head of the United Nations called in April 2021 for a wealth tax "on those who have profited" during the events of the last 14 months.
• Wealthy individuals living in the UK are sensing the less certain climate and are considering moves overseas to countries where they consider the tax environment more benign in the short to longer term. 

While there is not yet any clear view on the technical form of a wealth tax, there is increasing focus on key questions: would it be a one-off tax, or annual? What rate? Should it include or exclude illiquid assets? What about an individual's main property? How would trusts be caught?

The introduction of a one-off wealth tax "would be fairer and more economically efficient than alternative tax rises" – Wealth Tax Commission Final Report, 9 December 2020.

More detail:

• A so-called 'Wealth Tax Commission' published a report on 9 December 2020 outlining its view on the merits of a wealth tax and how it would actually work.
• This is clearly an opportunity for members of this body to make their mark as would-be architects of a potential new tax – a first for the UK.
• The 9 December report advocates for a one-off (rather than annual) wealth tax in the UK. The report does not recommend rates or a wealth threshold for the tax to be charged, but projects that a one-off tax of 5% on net assets over £500,000 would raise £260 billion.  It recommends that HMRC should receive additional resourcing to undertake policy analysis, particularly relating to the taxation of high wealth individuals.
  
  The UK Chancellor was reported in December 2020, after the publication of this report, to have said "what about a far-reaching and empathetic one-off wealth tax, as has been recently proposed? Surely this doesn’t sound like something a Tory party would do? I think that’s right, in the sense that we’re a party that believes in aspiration. Actually, we should be celebrating aspiration" he says — before warning that he hasn’t yet had the time to read that particular report." 

While the leader of the opposition has not made any clear statements on whether he supports a wealth tax, the Shadow Chancellor has made comments favouring the introduction of a wealth tax. 

Wealth tax "has got to be amongst the issues that we look at" – Keir Starmer speaking on Nick Ferrari's LBC show on 6 July 2020.

More detail:

• The opposition party clearly has some appetite for a wealth tax, but has not been drawn on any details.
• However, another election is not expected until 2024.