According to the annual Sunday Times Rich List, the 350 richest families and individuals in the UK have a combined wealth of £796.5 billion.
At a time when many people in the UK are struggling to afford necessities like food and heating, it’s not surprising that campaigners are using the Rich List to renew calls for a wealth tax to reduce the growing inequality between the richest and poorest.
This would be a tax on net wealth, rather than a levy on specific income or asset types. A one-off wealth tax has been proposed before by the Wealth Tax Commission.
Back in 2020, the think tank suggested a 5% tax on wealth above £500,000, payable over five years, which could have produced around £260 billion. Despite receiving considerable media attention, the government seemed to take no notice.
A few years on, several organisations have come together to campaign for a different wealth tax on the very richest, which could raise up to £22 billion a year.
New annual wealth tax proposals
Analysis by three tax reform campaign groups – Tax Justice UK, the Economic Change Unit, and the New Economics Foundation – suggests that a modest annual wealth tax in the UK could help to reduce inequality and ease the cost of living crisis.
By applying a 2% annual tax on wealth over £10 million, the UK government could generate between £17–22 billion a year to invest in public services. Only around 22,000 individuals in the UK would be rich enough to be liable for this tax.
The campaigners say that similar taxes in Norway, Switzerland, and Spain have helped to ease the economic crisis for poorer people in those countries.
Representatives of these groups have spoken out against the ‘fundamental unfairness in the tax system’ that means working people who earn their income are taxed more than wealthy people whose assets come from investments and inheritances.
They reiterate the urgency of reforming the tax system to make sure that those who own the most are taxed fairly, allowing working people who are struggling with falling standards of living due to increasing costs to also benefit from a growing economy.
As an example, the revenue gathered from their suggested wealth tax could fund the construction of 145,000 affordable homes a year, helping to ease the housing crisis.
It could also be put to use investing in drastically underfunded hospitals, schools, and public spaces across the UK, repairing broken services that should benefit us all.
Is there public support for a wealth tax?
Even before the pandemic caused costs to spiral, the general public was becoming more aware of growing wealth inequality around the world.
Earlier this year, YouGov polls revealed that the majority of Brits support a wealth tax on millionaires. A 2% tax on wealth above £5 million drew support from 73% of respondents, while 78% supported a 1% tax on wealth above £10 million.
Meanwhile, only 53% supported the Wealth Tax Commission’s proposal.
Introducing a new tax might seem like something that most taxpayers should be against, but the point of a wealth tax is to target a small percentage of taxpayers, who would only pay this tax on a small percentage of their excess wealth.
In addition to Income Tax, most taxpayers are already targeted by other forms of wealth tax, such as Capital Gains Tax (CGT) and Inheritance Tax (IHT).
Currently, inflation and tax threshold freezes are pushing more people than ever into paying more tax, while the wealthiest often hide their assets in offshore tax havens – but only 41% of YouGov respondents supported increasing CGT.
In any case, if the government’s lack of response to the Wealth Tax Commission’s proposal is anything to go by, the latest alternatives are also likely to be ignored, as the government seems to be focused on raising revenue by freezing tax thresholds.
Organise income and assets with tax planning
It’s important to ensure that you’re paying the taxes you owe, but also to make sure you aren’t paying more than your share – supporting the public purse while protecting your retirement funds and assets that you want to pass on to your family.
Managing income and savings with assistance from professional tax consultants like gbac can help individuals and their families to plan for the future, especially those who are self-employed, small business owners, or landlords.
Our accountants in Yorkshire could help you to get your tax affairs in order, regardless of your wealth status. Call us on 01226 298 298 to arrange a consultation, or email your enquiry to info@gbac.co.uk
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