What is wealth tax, and how might it reshape personal finances

24 July 2025

As the UK government looks to address the fiscal gap, the concept of a wealth tax has resurfaced, but what could a wealth tax entail, and what implications would it have for individuals and the broader economy?

What is a wealth tax?

A wealth tax is a tax charged on an individual, household or entity’s net worth. This includes the total value of assets such as property, investments, savings and valuables. The purpose of a wealth tax is to reduce wealth inequality and raise revenue for public services.

What could a UK wealth tax look like?

Current proposals spotlight those with a net worth of £10m+ and look to tax wealth above this level at a relatively high rate of 2%.

A key consideration for those impacted would be what, if any, assets would be excluded from the tax. There is likely to be pressure to exclude main residences and pensions from a wealth tax, but this would likely significantly reduce any revenue raised.

What are the challenges of implementing a UK wealth tax?

One concern is that wealthy individuals may relocate or move their assets to countries with more favourable tax regimes. This capital flight could result in reduced tax revenue for the UK Government as well as a loss of investment and lower job creation, therefore undermining the effectiveness of a wealth tax.

The third-sector is worried about the impact of a wealth tax on philanthropy and charitable giving. Many wealthy individuals are significant donors to charities in the UK, if they were to leave the UK because of a wealth tax, it could lead to a decline in charitable donations and a greater reliance on public funding to fill the gap.

A wealth tax would require accurate and up-to date valuations of assets some of which may be difficult to appraise including private businesses, farmland, intellectual property and artwork. This would require individuals to engage valuers, advisors and may lead to disputes with HMRC. Even individuals who fall below the threshold may need to incur the costs to prove they are exempt.

HMRC’s current infrastructure is geared towards income and transactional taxes, and they do not currently monitor individuals’ wealth. A wealth tax would therefore likely require investment from the Government into new technologies and expanding staff and training for HMRC. This cost would eat into the projected returns generated from a wealth tax.

A wealth tax could disproportionately affect individuals who own valuable assets but have limited liquid income. We have seen a similar response from farmers to the changes in Business Relief and Agricultural Property Relief that were announced in the 2024 Autumn Budget. A wealth tax could again affect farmers as well as elderly homeowners in high-value areas and small business owners with capital tied up in operations. Without exemptions or options to pay a wealth tax by instalments, these individuals may be forced to sell assets to meet tax obligations.

The UK already imposes a range of taxes on wealth, including Inheritance Tax (IHT), Capital Gains Tax (CGT), Stamp Duty and Council Tax. Rather than introducing a new wealth tax, some critics suggest that it may be more efficient to reform and modernise these existing taxes to address inequalities in the tax system.

What can the UK learn from wealth taxes in other countries

The global track record of wealth taxes is mixed at best, with only a few countries still imposing one. We have summarised these below:

Country	Rate	Key points to notes
France	0.5% to 1.5%	Initially, a wealth tax was introduced in France on net assets above a certain threshold, but over time, many wealthy individuals left the country, and the tax raised relatively little revenue. This resulted in a replacement of the wealth tax in 2018 with a narrower tax on real estate only.
Spain	0.2% to 2.5%	Spain still maintains a wealth tax which applies to net assets above €700,000. However, the tax varies by region, with Madrid residents having a 100% exemption. It is seen as politically divisive and is often challenged in the Spanish courts.
Norway	1% to 1.1%	Norway applies a wealth tax on net wealth above NOK 1.76 million (~£125,000). It is broadly accepted in Norway as part of the tax system as it has existed for more than a century, but critics argue it discourages entrepreneurship and investment.
Switzerland	0.05% to 1%	Wealth tax in Switzerland is levied on net assets at the cantonal level, with rates and thresholds varying by region. It is one of the few success stories, with it being generally accepted due to its long history, low rates and predictable administration.
Colombia	0.5% to 1.5%	A wealth tax applies in Colombia on wealth above approximately COP 3.5 billion (~£650,000). They have faced significant challenges, including widespread underreporting, the increased use of tax havens and difficulties verifying asset values.

Other countries have imposed wealth taxes in the past, but have repealed them in recent years. In the last 30 years, Denmark, Germany, the Netherlands, Finland, Iceland, Luxembourg and Sweden have all repealed wealth taxes due to inefficiency, complexity and political controversy.

The global experience with wealth taxes offers a clear message to the UK Government that correct design and implementation are vital. Examples from around the world show how poorly structured wealth taxes can lead to capital flight, underreporting and limited revenue gains. Meanwhile, countries like Switzerland and Norway demonstrate that low-rate, broad-based and locally administered wealth taxes can be more viable although not without controversy.

For the UK, this means that any move toward a wealth tax must be approached with careful planning, robust enforcement and public engagement. It must also consider the existing tax landscape and whether reforming current taxes might achieve similar goals with fewer risks. Ultimately, the success of a UK wealth tax would depend not just on who it targets but on how fairly, transparently and efficiently it is applied.