Taxing wealth – a viable option?

Despite denials, could the Chancellor be about to impose a wealth tax with limited reliefs for those with assets over 500K?

An independent body of tax experts has set out the framework for a one-off wealth tax. Will the Chancellor be tempted?

“[W]e have a responsibility, once the economy recovers, to return to a sustainable fiscal position.”

So said the Chancellor Rishi Sunak in his November statement, during which he also highlighted that the government was spending £280 billion this financial year on coping with the Covid-19 pandemic.

A wealth tax is one way that has been suggested to repay at least part of the massive debt that has accumulated. The idea was given a boost in December when a 125-page report detailing how a wealth tax could operate was published by the Wealth Tax Commission, which is independent of government. Its main proposals were:

The Commission estimated that such a tax would raise a net £260 billion. It would be payable by 8.25 million people, meaning it would reach many who pay income tax at no more than basic rate.

Rishi Sunak said in July, “I do not believe that now is the time, or ever would be the time, for a wealth tax”. However, as several commentators have noted, the Commission’s report has given the Chancellor cover to increase revenue from two related taxes he currently has under review – capital gains tax and inheritance tax.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.