Following the Covid-19 pandemic which blighted the UK economy the Wealth Tax Commission were tasked with finding ways in which the UK government could recoup the costs of the pandemic. The Commission prompted a number of research bodies to propose the introduction of a ‘wealth tax’ on those with substantial wealth.
As a result of their findings it was proposed that the tax would be applied as follows:
- A one-off wealth tax (as opposed to annual);
- A rate of 5%, payable at 1% a year for five years; and
- The tax to be payable on all wealth above £500,000, including pensions and main residences.
It was projected that that the tax would have produced £260 billion in total and despite receiving significant media attention at the time support for the scheme by government was thin on the ground and the proposal quickly disappeared from public view.
An introduction of Wealth Taxes for estates with a value of £500,000 or more would clearly result in a significant number of families being brought into charge and would be a huge political risk for the government which introduced it. The proposals as outlined above therefore had little hope of being introduced.
However, the threat of a wealth tax has not entirely gone away, particularly given the fairly recent publication of the annual Sunday Times rich list where it was revealed that 350+ individual combined hold personal wealth of c.£800 billion, those at the forefront of campaigns for ‘fairer tax system’ are pushing for a rethink on this proposed ‘wealth tax’ albeit with some tweaks as follows:
- It would be an annual tax;
- The rate would be 2%; and
- It would only be payable on all wealth above £10 million.
The higher wealth threshold means that less revenue would be generated than under the previous proposed regime especially as it is estimated by the Commission that only c.22,000 individuals have a wealth in excess £10 million, it is still anticipated this would raise over £17 billion if previous findings by the Commission in 2020 are to be believed.
A recent YouGov poll showed 74% public support for the 2% wealth tax, the results of which are hardly surprising as it would only impact a small number of the (very wealthy) UK population.
In spite of this it does however appear that this latest proposal will follow a similar path of its predecessor and not progress. As the threat of wealthy families leaving the UK and taking their assets elsewhere is real and would have a significant impact on the UK economy.
At Tax Advisory Partnership we are specialists in international private client tax matters, advising non-doms claiming the remittance basis and assisting clients with becoming non-resident of the UK for tax purposes. If you or your clients are concerned with the threat of a wealth tax being introduced and would like to consider your tax planning options then please contact us.