NEWS2 hrs ago
By Michael Knowles
Following the economic impact of the coronavirus (COVID-19) pandemic, the government is looking for ways of replenishing the public coffers through taxation.
One proposal is for a one-off 5 per cent wealth tax on an individual’s assets worth over £500,000 (£1 million for married couples), paid in five equal instalments over five years and based on the market value of the taxpayer’s assets on a specific date.
How does the uk currently tax wealth?
Existing UK wealth taxes include tax on the transfer of wealth (inheritance tax) and on returns on wealth (income tax/capital gains tax).
An alternative form of wealth tax would be a tax on the total wealth of an individual – something not currently charged in the UK. A new wealth tax could be based on the combined values of property, land, chattels (such as works of art), savings, investments and shares in companies. The Wealth Tax Commission (WTC) has proposed including main residences and pensions in any proposed wealth tax.
Do wealth taxes work?
There is a heavy administrative burden associated with annual wealth taxes, as wealthy individuals seek out loopholes, or even move abroad. Many European countries have abolished them as a result.
The WTC report argues that a one-off tax would be difficult to avoid, as it would be based on an individual’s wealth on a single assessment date and so could not be avoided simply by changing savings behaviour.
What are the alternatives?
The Office of Tax Simplification has proposed bringing the rates at which capital gains tax is charged into line with income tax, and scrapping the capital gains tax-free uplift on death.
There have also been proposals to reform inheritance tax, changing the rules on making lifetime gifts, and tightening the scope of business property relief and agricultural property relief.
Announcements in relation to taxation are expected in the March 2021 Budget.
Michael Knowles is a partner at award-winning law firm VWV, which has offices in Clarendon Road, Watford. Get in touch on 020 7665 0903 or [email protected]