04/03/21

UK: Govt avoids introducing one-off wealth tax.

As published on moneymarketing.co.uk, Wednesday 3 March, 2021.

The government has steered clear of introducing a one-off wealth tax to tackle the mounting debt caused by coronavirus.

There was no mention of such a scheme in today’s Budget but the topic could rear its head again in a few weeks, in what industry commentators have branded ‘tax day’.

On 23 March, the Treasury will publish a number of tax policy consultations, something which usually would happen alongside the Budget.

A wealth-tax had been mooted as one way for chancellor Rishi Sunak to help plug the hole in the country’s public finances caused by the Covid-19 pandemic.

The Wealth Tax Commission published its final report in December 2020 and concluded that the UK could benefit from a one-off wealth tax on all assets.

The group set up by the London School of Economics and Warwick University, revealed a five per cent tax on assets over £500,000, or £1m per household, would raise £260bn.

It said taxing the wealthiest in society would be a more efficient and fairer way of raising funds to sure up crisis-hit public finances than taking aim at the incomes of the wider population or consumer spending.

A wealth tax has not been considered in the UK since 1974.

In January this year, Sunak was reported to have rejected the idea of a wealth tax. The chancellor was presented with plans for a one-off levy on those with assets over £500,000, including their home and pension.

The chancellor ruled out the suggestion, arguing it would be “un-Conservative” to go against the party’s values.

In July 2020, St James’s Place private client director Alex Loydon told Money Marketing that the firm had been getting “lots of questions” from concerned clients about a potential wealth tax to pay for the coronavirus crisis.

At an individual threshold of £500,000 a wealth tax being introduced would affect around eight million people.

Speaking ahead of today’s Budget, Brown Shipley head of wealth planning, Rebecca Williams said: “A tax at this level is unlikely. The challenge for the Treasury is whether tax set at a higher threshold of wealth is worth the complexity, with potential issues around practicalities, implementation and administration of a wealth tax. In our view, it would be better to incrementally increase existing taxes rather than introduce a new tax that would overcomplicate the system.”

She added: “Now is not the right time for significant tax changes. The priority should be the roadmap for business support and protecting the existing tax base.”

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