16 / 12 / 2020
On 9 December 2020, the UK’s Wealth Tax Commission published a report on the feasibility of a wealth tax in the UK. It proposed the introduction of a one-off tax on net wealth above £500,000 at a rate of 1% a year over a five year period. A tax in this form is predicted to raise £260 billion for the Government and would therefore go some way to offsetting the cost of the Covid-19 pandemic.
It is important to note that these are proposals only, and the Wealth Tax Commission is independent of the Government, but it is not unreasonable to assume that the Government will be considering the idea to some extent. The proposed wealth tax would be based on total wealth including pensions and property with mortgages and other debts being subtracted. It would be a tax on individuals rather than households or couples, with UK residence being one of the eligibility factors. Trusts would also be affected if the settlor is UK resident in the year of assessment, although there are also circumstances in which trusts with a non-UK settlor could also be within scope.
Especially controversial is the proposal that a wealth tax should be introduced with immediate effect, without public consultation and without legislation being in place until a later date. The proposals are not expected to be well received by many Conservative voters and it remains to be seen whether the Government takes these proposals forwards in any form, but we will keep clients updated in the event of any major developments in the New Year.