Wealth tax in the UK: what you need to know (and why there’s no need to panic)

A wealth tax is a levy on the ownership of assets such as property, pensions, investments and business interests. Unlike taxes on income or spending, a wealth tax targets the stock of wealth itself. It can be designed as a recurring annual charge or as a one-off measure in response to exceptional circumstances.

The most comprehensive exploration of this concept in the UK came from the Wealth Tax Commission, convened at the start of the Covid-19 pandemic. Though the circumstances were unprecedented, the findings remain relevant in today’s economic environment. The Commission concluded that a recurring annual wealth tax would be administratively complex, prone to avoidance and ultimately less effective than reforming existing taxes. A one-off wealth tax was conditionally recommended, but only in the event of a fiscal emergency, and even then, only if other options were exhausted¹.

As with all areas of tax, prevailing rates and rules are subject to change and the impact on individuals will always depend on their specific circumstances.

The concept of a UK wealth tax is not new. In 1974, the Labour government returned to power on a manifesto pledge to introduce one, backed by a clear electoral mandate. Yet despite five years in office, the policy never materialised. Reflecting on this in 1989, former Chancellor Denis Healey admitted: “We had committed ourselves to a Wealth Tax: but in five years I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and political hassle².” This historical context reinforces the challenges that continue to surround the idea today.

The evidence from other countries is mixed at best. According to the Tax Foundation, only three European countries (Norway, Spain and Switzerland) currently levy net wealth taxes. Most others have repealed them due to low revenue, high administrative costs and negative economic effects³.

In Spain, for example, the combination of wealth and capital income taxes has resulted in marginal tax rates exceeding 100%, effectively taxing away all real returns on investment⁴. The Organisation for Economic Co-operation and Development (OECD) has also warned that wealth taxes can disincentivise entrepreneurship and harm long-term growth³.

The Institute for Fiscal Studies (IFS) has echoed these concerns, arguing that a wealth tax would be a poor substitute for properly taxing the sources and uses of wealth such as capital gains, dividends and inheritances⁵.

There are several compelling reasons why a UK wealth tax (particularly a recurring one) is highly unlikely in the foreseeable future:

There is currently no centralised system to track individual wealth in the UK. Unlike income, which is reported through PAYE or self-assessment, wealth is dispersed across property, pensions, businesses and offshore holdings. Building the infrastructure to value and monitor this would be a monumental task, with costs likely to outweigh any revenue gains¹.

Even the most optimistic timelines suggest that designing, legislating and implementing a wealth tax could take at least a decade¹. By then, the UK political landscape could look very different. The current government may not be in power and public priorities may have shifted.

Valuing private businesses, pensions and property on a regular basis is not straightforward. It’s estimated that exempting pensions alone would reduce potential revenue by over 50%, and exempting main homes would cut it by a third¹. The more exemptions, the less effective the tax becomes.

Most countries that tried wealth taxes have since repealed them. Where they remain, they often come with trade-offs, such as the removal of inheritance tax (IHT) or capital gains tax (CGT). In Switzerland, for example, there is no CGT or IHT³. The UK already has these taxes in place, making a wealth tax a potential additional layer rather than a replacement.

While polling suggests some support for taxing wealth, this often changes when people realise it could apply to pensions or family homes¹. The political appetite for introducing a new tax that affects a broad swathe of the population, especially those who are asset-rich but income-poor, is limited.

For those with significant assets, it’s natural to feel concerned when wealth taxes are discussed. But the evidence suggests that such a tax is not imminent, nor is it likely to be effective or politically viable in the UK.

That said, the broader conversation about taxing wealth is not going away. We may see continued scrutiny of existing taxes, such as CGT and IHT, as governments look to balance the books. Staying informed and planning ahead remains the best course of action.

We’ll continue to monitor developments closely as speculation builds ahead of the Budget, and remain committed to offering clear, objective insight. For more information, please speak to your Evelyn Partners adviser.

¹ Wealth Tax Commission, A Wealth Tax for the UK, 2020

² IEA, Wealth taxes – another failed idea that never dies, February 2021

³ Tax Foundation, Wealth Taxes in Europe 2025, February 2025

⁴ The Guardian, What is a wealth tax and would it work in the UK?, July 2026

⁵ Institute for Fiscal Studies, A wealth tax would be a poor substitute for properly taxing the sources and uses of wealth, July 2026