The Wealth Tax Commission

07.01.2021
Neil Holmes
Financial Planning, Tax

The Wealth Tax Commission was established in Spring 2020 to provide an in-depth analysis on proposals to introduce a UK wealth tax for the first time in almost half a century. The last was considered in the UK in 1974.

It is not a government body but a commission funded by the London School of Economics, Warwick University and the Economic and Research Council. The commissioners consist of senior academics from each school and University, along with a tax barrister.

The Commission provides advice and ideas on specific political, or economic problems.

The conclusions of the Commission were recently published, and while they do not reflect government policy, they should be given some attention.

The lengthy report comes out against the idea of an annual wealth tax, but it is strongly in favour of a levy on wealth, on a one-off basis, to deal with an exceptional need.

The need at the moment being that of repairing public finances, as a result of the COVID19 pandemic.

The basic premise is, if a government needs to raise a large amount of money, the best place to get it, is from people who have it. So, the question is, how does the Commission think a wealth tax should work?

  • It should be levied at the same rate on all assets. This includes the family home, businesses, and pension funds. Tax reliefs or exemptions would be unacceptable, complicated, and would offer opportunities for tax avoidance.
  • It should be levied by reference to wealth at a single date, with limited scope for reassessment or revision of the tax, should there be a dramatic fall in that wealth.
  • The option to pay over five years, with further deferral possible in specific circumstances, with the payment of tax from a pension fund deferred until retirement.
  • There should be minimal warning of its implementation to minimise the effect of advanced planning.
  • The tax should be levied on people who are UK tax-resident by references to assets in the UK and overseas. Special rules would apply to those who have recently arrived in the UK, and to people who have left shortly before the date of assessment.
  • Non UK tax-residents would only be liable to their UK property.
  • Assets held in Trust would be included if the person establishing the Trust or a beneficiary were UK-resident at the date wealth is assessed.
  • The assets of children would be aggregated with those of parents, and
  • A spouse or civil partner can elect to be taxed as a unit.

If a rate of 5% on assets in excess of £500,000 were used, this would mean that only one adult in six in the UK, would be liable to pay the tax, but this could raise £260bn.

Please see ukwealth.tax, or speak a financial adviser at Lovewell Blake, for more information. 

Find out more on this here

The Wealth Tax Commission was established in Spring 2020 to provide an in-depth analysis on proposals to introduce a UK wealth tax for the first time in almost half a century. The last was considered in the UK in 1974.

Some form of Wealth Tax inevitable given economic black hole and manifesto commitment on income tax

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