TaxPolicy
Could wealth taxes work?
The idea of imposing levies on personal or business capital continues to divide political and public opinion. Here, AT unpacks ways it could be done, along with their pros and cons
Words Steve Hemsley Illustration Getty
During the Covid-19 pandemic, Conservative prime minister Rishi Sunak briefly considered a levy on personal or business capital as one way to repair the nation’s finances as debt levels soared.
In normal times, wealth taxes tend to be discussed as an option not only to raise money but to reduce economic inequality.
Of course, wealth taxes already exist. For example, inheritance tax is levied on the value of someone’s estate when they die, and capital gains tax is paid on profits from an asset above an annual allowance, which has been lowered in recent years. There remains the option to levy this tax on primary residences and not just second homes and investment properties.
Unsurprisingly, the public is divided on whether wealth taxes are a good idea. A YouGov poll in July 2025 suggested that fewer than half (49%) of those questioned would ‘strongly support’ a wealth tax of 2% on estates over £10m. Others (26%) would ‘somewhat’ support one, which indicates how muddy the whole idea is, but it seems one-off wealth taxes are the most popular.
According to the Institute for Government (IfG), which used a University of Warwick tax simulator, the 2% levy above could raise about £24bn a year.
However, the administrative effort needed to make wealth taxes work, as well as voter doubt over the policy, has deterred politicians in the past.
As the IfG identifies, it takes time (and money) to work out how to value assets, where to set any threshold and rate, and whether to tax an individual or household, especially when you will often end up taxing people who are asset rich but cash poor.
One expert who is against wealth taxes is Miles Dean, partner and head of international tax at Andersen LLP. He is the co-author of International Tax Systems and Planning Techniques and The Principles of International Tax Planning.
“Wealth taxes are a woeful idea because they are usually badly thought out,” he says. “We have seen a lot of wealthy people leave the UK recently in what is reminiscent of the ‘brain drain’ of the 1970s. It can take years to get people back. We need to cut costs to stimulate the economy because more and more tax is not the answer.”
THE OPTIONS
Exit tax
An exit tax, sometimes called a deemed disposal charge, can apply to UK residents who emigrate.
Michael Foote, founder of Quote Goat and an expert on wealth taxation mechanisms, says the government acts as if someone was selling their assets at market value when they leave the UK.
“This prevents wealthy individuals from avoiding capital gains tax but it requires careful planning, especially when it comes to hard-to-sell assets,” says Foote.
The idea is that it ensures domestic wealth does not slip through the net and prevents capital flight. However, it does complicate emigration and needs clear rules to avoid double taxation.
“The UK does not have citizenship-based taxation like the US, so wealth held abroad is generally only taxed when it generates UK-source income or is repatriated,” says Foote. “This limits the administrative burden for expatriates but also makes global co-ordination and enforcement less comprehensive than US-style systems.”
He suggests that one wealth tax option is an annual surcharge on assets above a certain threshold (similar in principle to a net asset tax). This could apply to property, investments and certain high-value assets, although valuing illiquid items such as private businesses or art is complex and administratively challenging.
Another option is citizen-based taxation where people are taxed on their global income regardless of where they reside or their citizenship. This approach is employed in the US.
The UK’s challenge with wealth taxes isn’t just political, it’s rather emotional. People need to feel the system is fair.
A mansion tax
Chancellor Rachel Reeves announced the introduction of a so-called mansion tax in her 2025 Budget. The move will see owners of properties in England valued at more than £2m hit with a surcharge of at least £2,500 from 2028, while the highest charge of £7,500 will fall on homes valued at £5m or more.
The annual charge, which will come on top of existing council tax, will mainly affect those living in London and the south of England, and could include many two and three-bedroom flats as well as what people perceive as mansions.
The Office for Budget Responsibility (OBR) expects the measure to raise about £400m a year by 2029-30.
Jon Chambers, a chartered tax adviser with more than 18 years’ experience working in UK tax at experts Price Bailey, says even speculation around a mansion tax can spook the property market.
“We’re seeing increased sales of higher-value properties, with the main proposal being an annual tax on properties worth more than £2m. For example, as we understand it, if a property is worth £3m, the charge would be 1% of the excess – that’s a £10,000 levy.”
Another idea being mooted is for the tax to only be paid on the sale of the property. “This would alleviate the burden for individuals who are asset-rich but cash-poor,” says Chambers. “My personal view is that such an approach is unlikely to raise significant funds for the government, so an annual charge is probably more likely.”
Image: Getty
OTHER OPTIONS
Some options for wealth taxes will be less popular than others
Nishi Patel, managing director of N-Accounting in Northampton, says he wants to see progressive taxes because many people are sitting on wealth.
He believes some of the fairest wealth taxes could include:
- Progressive council taxes that reflect the true value of a house and do not provide discounts as a property becomes more expensive.
- Periodic capital gains taxes that are triggered every six years, in a similar way to how a trust pays tax, regardless of whether someone is selling an asset or not.
Council tax values in England are still based on 1991 estimates when the levy replaced the poll tax, or community charge.
“These are the least likely to be accepted but are arguably the most practical,” says Patel. “I’d suggest more ongoing taxes rather than one-off wealth taxes.”
He also warns the government to be aware of the Laffer curve. This is an economic theory that if taxes are raised too much, it can actually mean less tax is collected because people change behaviour.
“We are seeing this in a way with VAT being added to private school fees and parents removing their children,” Patel says.
The overseas view
So how do tax experts overseas view the UK’s current dilemma on imposing more wealth taxes?
New York tax consultant Ashley Akin, who formerly worked at KPMG and is now a senior contributor at financial publisher CEP-DC, says the UK’s struggle with wealth taxes is different to the US.
“There’s a deep cultural resistance to the idea of taxing wealth directly,” she says. “A lot of people see it as punishing success or threatening long-held family assets like farms and small businesses.”
She says the accountancy sector in the US is closely watching the unstable political environment in the UK.
“There’s no clear fiscal vision and that uncertainty makes major tax reform hard to pull off. Every time the government tries to tighten rules, like reducing benefits for non-domiciled residents, the backlash is immediate and loud.
“The UK’s challenge with wealth taxes isn’t just political, it’s rather emotional. People need to feel the system is fair before they will ever support a wealth tax. Without that trust, even the best-designed policy won’t get far. Right now, trust in the system feels pretty thin.”
Could wealth taxes work?
The idea of imposing levies on personal or business capital continues to divide political and public opinion. Here, AT unpacks ways it could be done, along with their pros and cons
Words Steve Hemsley Illustration Getty