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Wealth Tax Commission Report

Posted on 9 December 2020

The Wealth Tax Commission have now published their final report: A wealth tax for the UK.
Key findings include:

  • An annual wealth tax is not viable but a one off wealth tax should be considered
  • This one off wealth tax would raise a total of £260bn if levied at a rate of 5% on all individuals with wealth over £500,000
  • The tax would apply to all UK residents, including those who are not domiciled in the UK
  • To avoid distortion there should be no special exemptions or reliefs
  • It would have a wide tax base with all assets included, valued at their open market value
  • All trust assets would be chargeable if the settlor is UK resident in the year of assessment


The Wealth Tax Commission was launched in July 2020 and was tasked with determining whether a wealth tax should be introduced in the UK to help pay for the cost of the COVID-19 pandemic. The Commission considered evidence from leading tax practitioners, policymakers and academics. The final report represents an in-depth consideration of the arguments for and against a wealth tax as well as the practical issues that will be faced in implementing a wealth tax. The authors also consider design issues for such a tax and whether it should be levied on a one-off or annual basis. The report was not officially commissioned by the government: Rishi Sunak has already indicated that he does not consider a wealth tax to be appropriate. Nevertheless, the report is a comprehensive and evidence based treatment of the subject and will inevitably play a major role in the ongoing public debate on tax.

One off or annual?

The authors conclude that if a wealth tax is to be introduced it should be one off rather than annual. The authors acknowledge that the UK already has existing taxes on wealth, such as IHT, and consider that the UK would be better served by reforming those existing taxes than by introducing another annual tax. The advantage of a one off tax is that it minimises economic distortions because it is based on a fixed point in time and there are limited opportunities for people to respond in advance. The authors stress that the tax must be credibly "one time only" to avoid economic distortion. If taxpayers consider that there are likely to be further future wealth taxes they will modify their behaviour.

Connecting factor

The authors suggest that a wealth tax should be based on residency under the existing statutory residency test rather than domicile. This is on the basis that domicile is too complicated and uncertain in its application. However, to avoid unfairness and opportunities for planning, the authors suggest that residence "tails" should be introduced such that the tax is not levied on the basis of a single year of residency. New arrivals would pay a reduced rate of tax on the basis of the number of years residency and temporary non-residents would not be able to avoid the charge.

Assets subject to charge

A central plank of the report is that the charge should have a wide tax base applying to all assets on a worldwide basis. Importantly, main residences and pensions would be included within the tax base. The authors stress that government must resist the urge to introduce special reliefs and exemptions as this will cause distortion. The opportunity that reliefs provide for avoidance would fatally undermine any wealth tax, so the authors conclude. There are only two exceptions to this. First, a narrowly drawn relief could be introduced for those who suffer a dramatic fall in their wealth for reasons beyond their control. Second, those with illiquid sources of wealth should be given increased time to pay (but would not have a reduced tax bill).


The authors suggest that all trust assets should be subject to tax on a worldwide basis if the settlor is UK resident in the year of assessment, regardless of whether the settlor is excluded under the terms of the trust deed. The trustees would be primarily liable for the charge with the settlor having a secondary liability. The rules suggested for the taxation of trusts is similar to the existing regimes for income tax, CGT, and IHT.

Taxable unit

The authors conclude that the tax should be charged on an individual basis but with the opportunity for couples to elect to be taxed together. However, gifts to minor children would be aggregated within the parent's wealth. Related party rules would also apply to prevent connected taxpayers from benefitting from minority shareholding reductions.


The authors make no pronouncements on what the rate should be. This, they note, is an archetypal matter for democratic government. However, inferences can be drawn from the projections the report makes as to the amount of revenue a wealth tax would generate. The Commissioners conclude that if the tax was levied at a rate of 5% on total wealth over £500,000 per individual, £260bn could be raised. This would be paid over five years. Given that wealth includes pension rights and primary residences, this is a low threshold with the report predicting that 16% of UK adults would pay the charge if levied at that rate.


This report will inevitably fuel the debate as to how the UK tax system should be reformed to raise additional revenue going forward. As the report notes, previous attempts at wealth taxes in other jurisdictions have not been universally successful. For example, Ireland, Germany, and France have all abolished their wealth taxes. Whether this time will be any different will depend, as ever, on political realities.

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