Is a wealth tax on the horizon? DÉJÀ VU

In 2021, we explored the WTC’s recommendations to introduce a one-off wealth tax in response to Covid-19 (Is a wealth tax on the horizon?). Fast forward to 2025, and here we are again.

We are now seeing renewed calls for a wealth tax, most notably from Lord Neil Kinnock, who proposed a 2% annual levy on individuals with net assets exceeding £10 million.  

The overhaul of the non-dom regime has already triggered a significant exodus of wealth from the UK. Imposing a wealth tax will only serve to increase the fiscal gap, not plug it as advocates would hope. 

The International Context: Wealth vs. Inheritance Tax

One of the key arguments against introducing a wealth tax in the UK is that we already have a form of it—inheritance tax (IHT). At 40%, the UK’s IHT rate is among the highest in the world. In contrast, many countries that do levy a wealth tax have either abolished inheritance tax or maintain it at significantly lower levels.

For example:

- Norway, which has a modest wealth tax, imposes no inheritance tax.
- Switzerland has wealth taxes at the cantonal level but no federal inheritance tax.
- France repealed wealth tax and replaced it with a real estate wealth tax.
- Sweden abolished wealth tax and has no inheritance tax.

This raises a critical question: can the UK justify layering a wealth tax on top of an already burdensome inheritance tax regime? 

The UK already imposes one of the highest inheritance tax rates globally, and layering a wealth tax on top could risk driving away the very individuals and capital the economy needs to attract and retain.