Calls for a wealth tax— to address inequality and release desperately needed funding for the public services we all rely on— have been growing.
Our proposal is an annual 2% tax on wealth above £10 million, that could raise £24 billion every year.
That means everyone with wealth below £10m would be unaffected. So, only around 20,000 people in the UK – or under 0.04% of the population would have to pay. And they would only pay the tax on their wealth above £10m.
75% of the UK public, and 80% of UK millionaires back this wealth tax. But a small minority of greedy but influential vested interests are fighting tooth and claw to discredit the idea. Here’s the truth about the five most common myths they’ve been peddling:
Myth #1 — The rich will just leave (or they already are leaving)
The truth: Millionaires are staying put, taxes aren’t a major cause of migration, and exit taxes could protect against the greedy minority.
There are numerous reports flying around, sensationalised by the media, and based upon junk numbers and dodgy methodology. But there is no decent evidence to support the claim that millionaires are leaving already because of taxes, or would leave because of a wealth tax.
Existing evidence on reform of the UK’s non-dom status in 2017 by Advani and Summers showed that increasing taxes on the super-rich and restricting access to the non-dom regime likely led to just 2% of those who had been in the UK for fewer than 3 years leaving, a number which was significantly lower for those with deeper ties to the UK.
LSE research with individuals in the top 1% (2024) found that none of the people they spoke to were planning to leave the UK for tax reasons and the vast majority would never consider migrating due to tax.
Taxes aren’t a significant driver in decision-making about migratory decisions, and in fact many wealthy people feel a sense of patriotism to pay their fair share of taxes to the country that gave them the opportunity to thrive. Patriotic Millionaires UK are a network of UK multi-millionaires who say they are here to stay and support a 2% wealth tax – their most recent polling found that 80% of UK millionaires support a wealth tax.
The £24 billion predicted income of our wealth tax proposal has already taken into account the predicted behavioural response of wealthy people.
Looking at international examples, Tax Justice Network research found that just 0.01% of the richest households relocated after wealth tax reforms were introduced in Norway, Sweden and Denmark. For any substantial cost to the economy to occur, tax academics Advani and Summers have estimated that the migration response would have to be more than 15 times larger than that.
Yes, there is always some risk of a small number of extremely wealthy people relocating, but all the research shows the vast majority want to remain in their homes, and the revenue that could be raised by a wealth tax would far outweigh the money that would be lost from a small number of people leaving. In addition an exit tax could be levied to safeguard against any potential lost revenue by those seeking to avoid paying tax. This is a common sense approach already taken by Australia, Canada, the US, France, Germany, and Japan.
Myth #2 — It wouldn’t work in practice, because its so hard to value assets
The truth: HMRC already has some systems for valuing assets and could build more, and the tax would effect so few people it would make administration costs fairly low.
Assets are valued continuously in our day to day lives, from land to art, businesses to stocks and shares and cars. If they can be valued for sales, insurance premiums and other legal requirements, then they can be valued for the purposes of a wealth tax.
HMRC— the UK tax authority— already has a system that could be used as a starting point. It values the estate’s of those that have passed away every day in order to administer inheritance tax. This process is based on a system of self-declaration and auditing. Investment income is often fairly informative, as are things like receipt of trust income or of close company dividends.
HMRC would use this as a foundation, incorporating learnings from tax authorities in other countries with wealth taxes, to design a modern and efficient system for valuation and collection of a wealth tax. With proper funding and resource, HMRC could establish asset registers, alongside better data on investment income and trusts, reforms that would also help tackle financial secrecy and dirty money. Of course there is work to do to get everything in place to administer a wealth tax, but that shouldn’t be the reason not to implement one.
Furthermore, the threshold of the wealth tax we’re proposing means a relatively small number of people, tens of thousands, would be subject to annual valuation. This keeps the administrative cost and resource requirements for HMRC fairly low. Tax policy experts estimate implementation and administration of a wealth tax would cost around 1% of the revenue collected.
Myth #3 — Wealth taxes haven't worked elsewhere.
The truth: Wealth taxes have been implemented in a number of different countries, some have been successful, others less so. Our proposals learn from these examples
Switzerland utilises a wealth tax and is often vaunted as a destination for the super-rich to migrate to in spite of this. Norway and Spain have relatively recently introduced a wealth tax and both countries view them as a success domestically— hence why they are still in place. Despite negative hyperbolic claims, Norway’s wealth tax raises approximately 1.1% of tax revenue, which if applied to the UK, would be a significant influx of money (~£9bn) for the government to spend on priorities like healthcare and addressing nursing and doctors shortages.
Where wealth taxes haven’t worked out as well, like France, they were designed vastly differently to the policy we at TJUK are advocating for, and there are crucial lessons to be learned. In France, it raised little revenue and applied to a large number of people with a lower threshold— including those with over €1.3 million in assets, before being replaced in 2017. Ours would use a much higher threshold of £10 million, applying to a smaller number of people (roughly 22,000), and therefore would be easier for HMRC to administer and prevent avoidance.
France’s experience shows how not to design a wealth tax, not that wealth taxes don’t work. These lessons can be applied to the design and development of a wealth tax in the UK to ensure we get it right from the start.
Myth #4 — People shouldn't have to pay tax twice.
Truth: All of us regularly get double taxed, and unlike wages from work, income from wealth often hasn’t been taxed at all.
Every single day we pay double, triple or even quadruple taxes. We pay income tax and national insurance on our wages, but we still pay fuel duty and VAT if you fill up your car.
In fact wealth— and the income from it— is undertaxed compared to taxes people pay on work. Often, people don’t pay much or any tax on wealth at all, let alone twice. A large proportion of wealth in the UK has been acquired as a result of price growth on assets that have not been sold for a long time, and so have grown in value tax free, or accumulated through forms of saving that are exempt from tax, like pensions and ISAs.
Wealth is constantly growing in value because of the nature of assets (houses, art, gold, land, most stocks) that increase in value over time. Wealth globally is growing at 7.5% annually. So, a 2% tax would only slow that growth to 5.5%. We’d be taxing a fraction of the increase in value. To put it into perspective, wages over the last decade have typically grown by around 2-5% each year and we still tax approximately 30% annually.
So for most people, it is a convenient myth to claim that they have already paid tax on their wealth. Crucially, a wealth tax is not just a means of raising large sums of money for our communities and economy, but to adress the unfairness in our tax system, where income from work is taxed more than income from wealth.
Myth #5 — The wealthy would just dodge the tax
Truth: Most of the super-rich’s wealth is tied to assets, which are very hard to move, and moving them wouldn’t end their liability.
Whilst it is true that the super-rich have a lot of resources and ways of dodging taxes they don’t want to pay, such as offshore accounts, tax planners, and teams of accountants, a wealth tax would actually be quite hard to avoid.
A large proportion of the super-rich’s wealth is tied to assets like land and property that can’t be taken out of the country. Additionally, there would be no point in someone moving money offshore, even before the announcement date. This would not reduce their liability as the tax would be based on where the taxpayer lives (in particular, their tax residence over the preceding years), not their domicile or where their assets are located.
HMRC also now has plenty of tools to track such transfers, as part of a global international compliance effort, and this is unaffected by Brexit. Indeed, people who tried to evade the tax in this way would end up paying higher penalties.
Moving cash into a company after any announcement would have no effect on a person’s tax liability. Even if these funds were moved prior to the announcement, the tax would apply to the value of the shares held by the individual. Therefore, moving cash into a company in exchange for the issue of more shares or debt would simply end up increasing the value of their shares. There would therefore be no point in attempting this tactic unless the shares were exempt from the tax, which highlights the need for a comprehensive tax base.
Again, sensible exit taxes, like those in California— which makes people liable up to 10 years after they’ve left— could help mitigate the issue of individuals relocating to avoid the tax. An exit tax would ensure we recoup some of the money that the state invested in infrastructure and opportunities to these businesses and individuals.