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The UK’s public finances are estimated to have about half of the fiscal headroom that Rachel Reeves created after her budgets, following the war in Iran.1 Understandably, this has created a lot of debate around the most effective and most ethical ways to repair the public finances, while simultaneously growing the UK economy.
An idea now increasingly held up as an answer to fixing public finances is a Wealth Tax. It’s simple – those with the deepest pockets should pay more for the upkeep of UK PLC.
Should we be worried about a Wealth Tax?
Potentially. Gary Stevenson, a prominent trader-turned-political commentator is one such proponent of a Wealth Tax. He argues that the concentration of wealth in the hands of the super-rich is stifling the ambitions of generations of young people, pricing them out of the property market and leading to a culture where hard work does not give people the basic rewards that it has done for many years, which could lead to civil unrest. Stevenson argues for a 2% tax on estates worth over £10m through his Patriotic Millionaires group, which includes the likes of Gary Lineker.
There’s some support for a Wealth Tax among ministers in Andy Burnham’s government. A group of left-wing MPs in the Labour Party signed a petition aligned to Stevenson’s proposal in 2025, and Plaid Cymru has also expressed support for a Wealth Tax.
As ever with taxation, the implementation of a tax is hampered by the UK’s onerous tax code and a common argument against this is that the cost of administration would outweigh the amount collected, while also putting off wealthy people from moving to the UK or building a business here.
Do Wealth Taxes work?
Historically, no. The Laffer Curve is a concept whereby the Laffer Curve, developed by economist Arthur Laffer, suggests that at a 0% tax rate, government collects no tax revenue. At a 100% tax rate, there is little incentive to earn taxable income, so revenue also tends towards zero. Somewhere in between is a tax rate that maximises revenue.
Scotland is currently somewhere on the Laffer Curve after raising the top rate of Income Tax to 48% – contrasting tax data suggested that initially income had fallen but its most recent accounts suggest it has risen. The unprovable aspect of course, is whether they would have raised more by taxing less, as people would not have bothered trying to escape it through planning or moving away.
Could a Wealth Tax be announced at the Budget?
This feels extremely unlikely. Given the complexity of organising HMRC or an equivalent body to administer the tax, a long window between announcement and execution would likely lead to an exodus of those caught in the crosshairs and a race to organise estates for those staying domiciled in the UK.
What should people do if a Wealth Tax is announced?
Unfortunately, without the details of a Wealth Tax and a timeline for implementation, there’s not really anything specific to be done. However, the basic principles of financial planning certainly apply. Using the full extent of tax-efficient wrappers to hold wealth and holding strategic conversations about how wealth should flow through the family will lead to the natural solutions, which your financial planner can implement. A generational Wealth Tax would be difficult to force through parliament and should give everyone impacted at least some opportunity to make plans.
In some ways, it’s similar to the upcoming Inheritance Tax changes.
How far an individual wants to plan against it will dictate their approach – and as ever, money is ultimately there to be spent. Changes like a Wealth Tax and IHT are very good at challenging assumptions and give people fresh clarity on their priorities, so even talk of it is an opportunity to be grasped.