The Wealth Tax Commission has published ‘A wealth tax for the UK’ which calls for a one-off UK wealth tax of five per cent on assets above £500,000. It should raise over £260bn for public finances hard hit by COVID-19.
The report defined the ‘wealth tax’ as a broad-based tax on the ownership of net wealth and, in this case, was described as a once-in-a-lifetime charge. The report concluded that an annual wealth tax is a 'non-starter' in the UK and that government needs to address ongoing taxes on wealth with the existing and new legislation.
While the report considered various options, it suggested applying a five per cent tax to all of an individual’s assets worth more than £500,000 and could raise £262bn. The tax would also apply to ‘non-dom’ residents, bringing eight million people into the tax net.
Key points of the report are:
- Tax would be calculated on the market value of an asset on predetermined dates of:
- In respect of pension wealth payments, these should be payable out of the pension lump sum on retirement, for those not yet at state pension age. In these cases, deferral and automatic withholding should be allowed.
- The primary home.
- The research accepted that there were those who were asset-rich (the family home) but cash-poor and they could be given more time to pay under 'carefully predefined' conditions.
- Minus any debts such as mortgages.
- Payment of the tax in five equal instalments over five years.
- Spouses or partners could pool their allowances effectively giving households more than £1m net wealth.
Alternatively, setting the threshold at £2m per person or £4m per household would raise £80bn over five years and affect 626,000 people, the report said.
The report was funded by the Economic and Social Research Council which commissioned research from more than 50 tax, policy and research experts under the auspices of Warwick University and the London School of Economics.
Useful guides on this topic
Full report: A wealth tax for the UK
Executive summary: A wealth tax for the UK