On 9 December 2020, the Wealth Tax Commission published its report on potentially introducing a UK Wealth Tax. The Commission ultimately recommended that the UK should introduce a one-off wealth tax in order to help meet the costs of the COVID-19 pandemic.
Since then, a further FAQs document has been released in response to some of the criticisms made against that report.
The key recommendations for the proposed Wealth Tax are as follows:
- The Wealth Tax must apply on a one-off basis, although payment could be spread over five years for those who are "asset rich", but "cash poor".
- An annual wealth tax should not be introduced.
- The rate of the Wealth Tax should be determined by the Government. Notably, the report is silent on what the correct rate should be, contrary to what widespread media reports have suggested.
- The Wealth Tax should be payable by relevant individuals who have been UK resident in at least four of the previous seven UK tax years.
- Trusts should also be subject to the wealth tax on all the assets within the trust, but only where the settlor is UK resident in the year of assessment.
- Couples should have the option to be taxed as a unit, but the default should be that they are taxed as individuals.
- The charge should be applied against a broad asset base (including pension rights and homes), and there should be no exemptions for specific classes of asset. As a result, the Wealth Tax is more likely to impact older generations.
- A wealth tax should be in addition to, not instead of, reform to other UK taxes.
Many are already asking whether they are outside the scope of a potential wealth tax, and if so, whether they can take any action to mitigate its effect. The authors of the report sought to combat such action by applying the Wealth Tax based on residence in previous tax years.
Speculation is rife as to whether the Government will follow the recommendations of the report in the upcoming budget on 3 March 2021.