Jasmine Birtles
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Fair Share for the Wealthy? King Charles Coronation Sparks Debate on taxes paid by the rich
Reading Time: 3 minutesAlex Loydon, SJP, talks taxing times as rumours of IHT cuts surface and how a wealth tax could affect low income, middle class and the super-rich.
The middle-class squeeze: Wealth tax has been a topic of much debate in the UK, with a renewed urgency to think big on high tax policy. As we face the largest public finance crisis since the Second World War, the need to consider the implications of a wealth tax is arguably more relevant than ever. While public attitude shows a clear desire for the wealthier to be taxed more – with over half (56%) of UK adults supporting the introduction of a wealth tax and 6 in 10 (65%) [1] believing that the wealthiest individuals should be paying more in taxes than they currently do – what is less clear is how any cuts in inheritance tax would be funded. One option could be a new wealth tax.
The Wealth Tax Commission was established in Spring 2020 to provide in-depth analysis of proposals for a UK wealth tax. Its report was published in December that year and proposed a one-off tax on the richest people in the UK. But what are its implications and is it time we started asking ourselves, what is a fair share for the wealthy?
58% of UK adults believe that the UK tax system is currently unfair, and that the wealthiest individuals are not paying their fair share. On top of this, over half of us (51%) believing that a wealth tax is a fair way to fund public services [2]. So, despite the then Chancellor Rushi Sunak saying in July 2020, ‘No, I do not believe that now is the time or ever would be the time, for a wealth tax’, much has changed since then and as John Maynard puts it, ‘when the facts change, I change my mind’.
As the cost-of-living crisis continues to see most of the UK struggling, biting against the upcoming Coronation of King Charles who has been criticised for not having paid any inheritance tax on assets worth over £1 billion inherited from the Queen; do these taxing times, beg the questions:
‘What are the implications of a wealth tax in the UK? And what do each demographic need to keep in mind?’
Lower income individuals: The introduction of a wealth tax could lead to a sense of fairness and greater equality. Currently, it is the upper-middle class who pay the highest rate of tax, while the super-rich take advice and use the generous swathes of exemptions and loopholes. A wealth tax could rebalance this situation, ensuring that those with significant wealth contribute more to the public good.
The middle class: The introduction of a wealth tax could have a significant impact on their retirement plans. Many middle-class individuals have worked hard to build up their assets, such as their homes, pension funds, and savings. A wealth tax could potentially reduce the value of these assets, making it harder for them to maintain their standard of living in retirement. This would need to be considered when designing any new wealth tax regime.
The super rich: The implications of a wealth tax could be more profound. The super-rich have access to a range of legal and financial advisors who can help them to minimise their tax liability. The introduction of a wealth tax could lead to a situation where the super-rich move their assets overseas, making it harder for the UK to collect the tax. This could result in a brain drain of talented individuals and entrepreneurs who are crucial to the UK’s economy. It’s essential to consider how any new wealth tax would impact the UK’s competitiveness as a place to do business.
The implications of a wealth tax in the UK are complex and far-reaching. While there is a clear desire for wealth to be taxed more, we must also consider the potential impact on different demographics. For lower-income individuals, a wealth tax could lead to a greater sense of fairness and equality. For the middle class, the implications could be significant for their retirement plans. For the super-rich, the implications could be profound, potentially resulting in a brain drain of talented individuals and entrepreneurs. As we move forward with this critical debate, we must ensure that we have a robust evidence base and consider the potential implications for all demographics. Only then can we design a wealth tax regime that is fair, equitable and meets the needs of the UK in the 21st century.
[1] Source: YouGov, “Majority of Britons support the introduction of a wealth tax,” 9 September 2021
[2] Source: Opinium, “Wealth tax seen as a fair way to fund public services,” 22 October 2021
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As someone from outside the Uk I find this fascinating.