Could a wealth tax be on the cards?
A non-Government body from Warwick University have published a report regarding a one-off wealth tax for the UK. If the rate were set at 5% on assets over £500,000, they estimate this would raise £260bn in tax. Although back in April Rishi Sunak said he would not consider this, the Government have been surprisingly non-committal on the report, so his views may have changed.
The last time this was considered was back in 1973, and although it never went ahead, it did lead to capital transfer tax (which later became inheritance tax) being introduced.
The report is suggesting that the wealth tax would be levied on an individual basis to all UK residents, trusts, beneficiaries of trusts and non-residents with UK based assets. This would be on net assets above £500,000, with a provision to allow couples to choose to be jointly assessed, in which case the combined entity would need more than £1m in assets in order to qualify. The tax rate would be set between 1% and 5%.
The assets would include all property of an individual, including personal chattels, pensions and property. Assets would be valued based on their open market value, whilst property and land values would be calculated by the Valuation Office. The net asset figure would be calculated after mortgages and other debts, and would be payable only on amounts above £500,000. Interestingly, it is suggested that individuals owning private company shares would not receive a discount for a minority holding on the valuation of the shares for wealth tax purposes.
Individuals should not have to sell assets to pay the wealth tax, so the report suggests that it should be payable over 5 years, or wealth tax due in respect of pension wealth should be payable out of the pension lump sum on retirement.
The report found there was clear backing from the public for a wealth tax, but it appears most individuals polled would in fact not have to pay it themselves!
It is expected the government will borrow £394bn this year, or the equivalent of 19% of GDP, the highest level of borrowing in the UK’s peacetime history. Many commentators feel that the introduction of a wealth tax will be too difficult to implement, that it is potentially explosive politically and it will be voted down by conservative back bench rebel MPs.
But, given the level of UK debt, it should perhaps not be so quickly dismissed. My view, however, is that this would be a bridge too far and is highly unlikely to get the green light. More likely, and easier for the Government to implement, is an increase in general tax rates and in particular capital gains tax as previously reported.
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