Last week the Wealth Tax Commission completed it’s findings and concluded that a wealth tax would meet with general public support. This is perhaps unsurprising given that the vast majority of the public would not be hit by such a tax. The report provides suggestions for how such a tax would work and the ‘take home points’ are as follows:
1. Tax applied quite widely and not just to the super rich.
2. It suggests that an individual’s wealth over £500,000 should be taxed.
3. It does not suggest rates but provides an example which says that 5% on assets over £500,000 per person would raise £260 billion.
4. Here the 5% would be payable over 5 years.
5. It suggests all asset classes are included with no carve-outs for main residence, pensions or business assets.
6. It proposes that a specific valuation date is used with no allowances for falls in value following that date.
7. It suggests that the tax should apply to all residents and recent residents.
Forbes Dawson view
Firstly, it is important to realise that this is not the Government’s report and it did not even commission it. However, we all know that there will be a few tax shocks over the next few months and Rishi has no doubt been reading it with interest while avidly taking notes.
Although, it is interesting to hear that this tax could raise £260 billion, this approach would have multiple practical problems:
1. How do asset rich/cash poor people pay? (By selling assets which would trigger more tax).
2. Collecting tax from former residents who have left the country to avoid the tax.
3. Policing accurate valuations on a huge scale.
4. Perceived unfairness if non-residents are not taxed on UK assets.
It is also a fairly lazy way to raise funds and offends a principle held by most people that post-tax income is exactly that – post-tax!
Although a wealth tax is far from certain it should be an additional factor in the back of people’s minds when they make gifts for inheritance tax purposes (a tax which incidentally is also under review).
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