Many people on the UK's left want a wealth tax. The trouble is that one of those would take years to deliver. Taxing income and gains from wealth more makes much more sense.
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This is the transcript:
Do we need a wealth tax? I asked the question because Rachel Reeves will undoubtedly be talking about the constraints on UK government spending during the course of her spending review on Wednesday this week. And so the question will come up: do we need a wealth tax? And my answer is no, we don't, but we do need to tax wealth and the income derived from it a great deal more.
Now, there is no contradiction in what I've just said.
A wealth tax requires somebody to tot up everything that they own, and if they go above a certain monetary limit, then the state will say to them, "We want 2% of your estate worth over 2 million pounds this year", or whatever the number might be. And there are various proposals on the table.
But if we instead taxed income and gains from wealth more, which is what I propose, all we simply do is change the tax rates and some of the allowances and reliefs within the tax system that already exist so that those with wealth simply pay more on the income and gains that they already report to HM Revenue & Customs.
Now, one of those arrangements is really very complicated to put in place and will require politicians to expend a considerable political capital if they are going to achieve their goal of collecting any more money from people with wealth in the UK. The other option is pretty straightforward and can be put in place incrementally.
The complicated option is a wealth tax.
It would be immensely difficult to design a wealth tax. That's because there would have to be rules about what wealth is included, how it's valued, how it's declared, and how values will be established against market principles that is not easy and straightforward. And the rules of tax as they currently exist may not be adaptable for this purpose. In other words, not only will it take time to put into place, but there will be a long learning curve before it can be got right.
The one that is easy to put into place is to change the rates and allowances and reliefs on wealth and gains already reported to HM Revenue & Customs.
I'm a pragmatist. I want to tax wealth in the UK more. The reason why I want to tax wealth in the UK more is twofold.
Firstly, I want to reduce inequality. Plain straightforwardly, I want to tax people who have got an excess of income and wealth over and above any reasonable need that a person has to be able to meet their requirements in life.
I want those people to pay more tax because that will rebalance our economy and reduce the stress within it, whilst passing income to those who do not have enough income, who therefore will promote growth by spending everything they receive. So a straightforward policy of redistribution not only reduces social stress, but also boosts economic growth by putting money in the hands of the people who will spend it rather than in the hands of the wealthy who will save it, and that has to make economic sense at this point of time because there is not enough economic activity in the UK economy to ensure that everybody can be employed at a living wage and that matters.
The second reason why I'm keen on increasing tax on income and gains derived from wealth is that I'm aware that the UK government needs to spend more money. And it does. There are lots of things that it needs to spend money on, according to the Labour Party. Defence is high on that list of priorities, but we also know that the NHS is still underfunded and needs to have settlements in excessive inflation every year just to keep up with medical advances.
We know that education is underfunded.
We know that investment in transport and housing is underfunded. I could keep going.
The point is the government does need to spend more because there is a need that is not being met in our society, which only the government can deliver. So we need to spend more, and if we have the government spend more, the government has to recover more by way of tax from the economy. Otherwise, it has created too much money when compared to the level of potential demand that exists within the economy. And, without recovering that money by way of tax, we might otherwise end up in an inflationary environment.
I don't want us to end up in an inflationary environment.
I don't think that's a benefit to anybody. A little bit of inflation is fine. Very much beyond a little bit. We know that can destabilise things, and we know it is deeply unpopular with electorates, and that is because people feel insecure and nobody likes feeling insecure. So we don't want to achieve that outcome.
But that means if the government is to spend more, and it should, it must tax more simply because it must take money out of circulation.
Now, there is an argument that taxing the wealthy does not take money out of circulation. But I would wish to disagree with that. If we selectively balance the money taken out of circulation from the wealthy with the need to stimulate the economy by providing money to those who have the lowest level of income, we also encourage more economic activity by those on the lowest level of income because they are encouraged to go back to work in the communities where they work in particular, and the consequence is that we can rebalance by bringing these factors together in a way that I think would deliver this non-inflationary environment of reallocating money and at the same time boosting local economic activities so that we would actually bring more resources into use, and that is not an inflationary consequence of doing this. Therefore, the balance will, I think, work. Although, and I would stress it, the government would, of course, need to keep an eye on inflation.
But my point, and let's go right back to the beginning, is that a wealth tax by itself could not do this. At a minimum, I think it would take five years to get a wealth tax into operation. What I'm suggesting are some very straightforward changes, which could be put through in any budget by a government.
Let me offer you some examples.
Restricting pension tax relief to the basic rate of income tax so that those who currently get tax relief at higher rates would, if it was restricted, deliver £14.5 billion of extra tax revenue to the government each year. That is more than I have seen some estimates for wealth taxes raising.
If we had an investment income surcharge, which means that we would charge 15% extra tax on investment income, that's rents and dividends and interest, above, say £5,000 a year, then that could raise up to £18 billion a year, and will be the equivalent of a national insurance charge on investment income, which would only create fairness between those who have to live on income from their work and those who live on income from their savings.
If we charge national insurance on all earnings right across the income range, that could raise over £10 billion a year.
If we aligned the capital gains tax rate with the income tax rate, my estimate is that that could also raise over £10 billion a year.
And if we charged VAT on financial services, and now we are outside the EU ,there is no reason why we shouldn't, and the only consumers of financial services are wealthy people, then we might raise £8 billion a year.
Add all those together, and we come to something like £60 billion.
Now that number is give or take a bit because all these things are estimates and I'm not giving you a cast iron guarantee that they would raise precisely the sums I suggest. But the point I'm making is that if we want to raise serious sums of money to cancel the consequence of the government spending on the things that we need, which is what I suggest a government in the UK should now be doing, then we do need that sort of level of additional tax revenue.
We can't get it in the short term from a wealth tax, so we can't therefore do the spending that is required, because otherwise we might get an inflationary consequence. And so to prevent that inflationary consequence, let's forget the idea of doing a wealth tax and let's instead put in place the measures that I've suggested because they're available, if not tomorrow, then by next year, when all of these changes could be put into effect.
The government would have the revenue it would need, and it could spend on what we want.
The opportunity to radically transform the fortunes of our society by providing it with what we need, including the defence that Labour wants to spend money on, is there if only we have the courage to tax the rich more, and it's not hard to do.
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I agree with everything you say here, but I have a couple of points. Rather than everyone having pension contribution tax relief at the basic rate, would a fixed sum be better? Currently pension auto enrolment starts when you earn £10,000, but the tax threshold is higher than that, so the lowest paid get no tax relief.
Also I don’t think I have seen you mention salary sacrifice, which allows pension contributions, and other benefits free of tax and NI. The well paid use it to avoid entering a higher tax bracket. But it isn’t available to the low paid as it cannot take income below minimum wage. The low paid therefore have to pay NI on their pension contributions.
All excellent points….
There is a moral objection to a wealth tax too. It’s a tax on the accumulated differences between your income and spending. Moreover if you did spend that difference on something that retained a £ value, that would be included in the wealth calculation. You will already have paid all historic income and consumption taxes when accumulating the wealth and then along comes the government and says it wants 2% of what you did years before when you may have been justifiably thrifty. There’s a word for retrospective taxation and it’s theft.
Politely, don’t be stupid.
Wealth is at the levels we’re talking about the future discounted value of the sum you can extract from society, usually unrelated to efort on your part.
Your claims are total mythology without any evidence in theory or practice, again at the levels we’re talking about.
The only theft here is the exploitation by the wealthy that you deliberately ignore.
“Wealth is at the levels we’re talking about the future discounted value of the sum you can extract from society, usually unrelated to efort on your part.”
Well that’s what a communist would think.
Actually, that’s standard economic theory taught in all economics degrees and business schools and it is how wealth is valued for accounting purposes, for example.
Are they all communists? Please explain how and why.
Richard,
Excellent. As you have pointed out though and I have provided examples, its pretty easy to value the sort of stuff that people like you and I own, Houses, 17 year old Kia (Q violins) etc but when you get into things like high end houses as a simple ‘for example’ top pf the range houses then finding suitable comparables is much less easy and of course establishing who exactly is the owner
“Plain straightforwardly, I want to tax people who have got an excess of income and wealth over and above any reasonable need that a person has to be able to meet their requirements in life.”
Now that is an interesting one. Do you think you are best placed to decide what that might be?
Tell me why I might not have an opinion?
Or is freedom only availabnle to those who agree with you now?
“If we aligned the capital gains tax rate with the income tax rate, my estimate is that that could also raise over £10 billion a year.”
According to data from HM Revenue & Customs, capital gains tax (CGT) receipts fell to £13 billion in the 12 months to March 2025, down 10 per cent from £14.5 billion in the same period last year because of the wealthy leaving the Country due to higher tax rates. Sounds like tax influences behaviour so your estimate is almost certainly going to be wrong.
And how did they work that out when they had no tax returns by the time they made the claim? Very politely, you are dissembling as much as they are.
It is CGT receipts in the year to March 2025. So that is a known numbers. A chunk will have been paid by the end of January 2025 alongside tax returns for the 2023-24 year end. And chunks will have been paid within 60 days after selling residential property. Little of that will have much relation to changes in tax rates in October 2025.
Capital gains tax is a little unusual. It is a product of three things – gains having arisen over time, and the tax rate at the time of disposal, but also a person deciding to dispose of an asset. The rate changes in October 2024 could easily have increased the amount of tax received by HMRC in 2024-25 if people decided to realise the gains in anticipation of potential changes, or to realise the gains regardless of a small increase in rate (because selling at the right time is usually more important that worrying about a few percentage points of tax).
But if sale prices have not increased over the base cost, or if people decide not to sell, or they have left the UK, then no CGT will be payable, whatever the rate.
Thanks
The real point is, the impact of the rate changes is not known as yet.
Richard, you have made many posts as to why a wealth tax might be difficult to introduce, and why simply adjusting the current system is significantly better. I also suspect that many of those who call for a wealth tax, will be aware of your logic and explanation for this.
The conclusion I draw from this, is that those people are using a “wealth tax” as a smoke screen to appear to be tackling inequality, whilst avoiding making actual, real-world “difficult decisions” that really would tackle inequality.
Correct
A v timely post.
A question, because you will know this, I don’t.
You refer in passing to the role (or not) of wealth in the economy, the problem of it being “lazy” money whereas money in the hands of the less wealth is at work. You refer to the argument that taxing the wealthy may be less counter-inflationary because of that.
I fully agree with your reasons for not liking a “wealth tax” because of wealth being difficult to calculate and monitor.
My question – how “mobile” is wealth? If we tax income and gains we can only do so when it moves.
Does enough of the wealth of the wealthy “move” enough to make taxing income and gains a viable way of destroying enough money to have the desired macro-economic effects?
I’m assuming the answer is yes, but I’m trying to anticipate challenges!
I plan to do some stuff on this – probably next week
The real problem now is to persuade the main stream politicians to endorse this. It is a solution to many of our problems. I find it so frustrating that most of them continue to churn out the same cliches and arguments.
As alway Prof Murphy puts forward a thoughtful and well-argued case for prioritising reforms to existing wealth-related taxes over the introduction of a formal wealth tax. The focus on political feasibility, administrative simplicity, and immediate impact is pragmatic and timely—especially given the urgent social investment needs the UK faces.
That said, there are some additional, workable ideas worth exploring alongside Prof Murphy’s proposals:
1. Reform Council Tax and Business Rates
Council Tax in England is still based on 1991 property values and is regressive, with lower-value homes taxed at a higher effective rate than luxury properties. Rebanding Council Tax—or better yet, replacing it with a proportional property tax based on up-to-date valuations—could raise significant revenue more fairly. Likewise, replacing or reforming business rates with a land value tax could discourage land hoarding and support enterprise.
2. End “Non-Dom” Status and Close Offshore Loopholes
Ending non-domiciled tax status entirely and increasing transparency around offshore holdings would reduce avoidance and increase compliance. Targeted action against tax havens—through public country-by-country reporting and beneficial ownership registers—could also help claw back some lost revenues.
3. Create a Social Inheritance Tax
Rather than applying inheritance tax only above a certain threshold at death (which is often circumvented), consider a lifetime receipts tax: tax individuals on what they receive in gifts and inheritance over their lifetime. This approach spreads liability more fairly and encourages broader economic mobility.
4. Introduce a Financial Transactions Tax (FTT)
Even a modest FTT—such as 0.1% on equities and 0.01% on derivatives—could raise billions annually, while discouraging high-frequency speculation. Most of the burden would fall on the wealthiest institutions and investors with little economic disruption.
5. Crack Down on Empty and Underused Homes
Imposing stronger taxes on long-term empty homes and second properties could both generate revenue and incentivise better use of the existing housing stock—helping ease the housing crisis.
6. Expand Windfall Taxes Beyond Energy
Windfall profits in sectors like banking, big tech, and defence contractors could also be subject to temporary surcharges in times of crisis. The precedent already exists and could be broadened when profits are clearly inflated by external shocks (e.g. war, inflation, monetary tightening).
Ultimately, the idea that taxing wealth is too complicated or politically toxic is often overstated. The key is not a one-size-fits-all wealth tax, but a package of reforms that tilt the system back towards equity, simplicity, and economic efficiency—without overloading the tax authority or triggering long implementation delays.
Prof Murphy is right: the political choice is not whether to tax wealth more, but how to do it fast, fairly, and in ways the public can trust.
Some of those are in the Taxing Wealth Report. Those that are new are not, since I restricted myself to modifying existing taxes in that work.
I vaguely recall reading that Buckingham Palace pays a similar amount of Council Tax to regular properties. I’d like to see larger properties paying a farer share of Council Tax.
I also wonder whether corporations should be banned from owning multiple properties for rental purposes, I don’t think they make housing affordable.
Council tax was designed to ensure that those living in poorer areas pay more than those living in wealthy areas.
It goes like this. The council sets the overall amount of council tax needed to provide rhe income needed. That rate is the D band. All the other bands are % of the D band, set by legislation.
In a deprived area a large proportion of the houses will be in bands A – C. They are the majority, most of the council tax comes from those bands. In a wealthy area a large proportion of the houses will be in bands E – G. This automatically means that the rate in deprived areas must be higher than the rate in wealthy areas.
I live in Gateshead.
Band D is £2,578.17
Band A is £1,718.78.
Band G is £4,296.95
Band H is £5,156.34
In Kensington and Chelsea
Band D is 1,508.98
Band A is £1,046.31
Band G is £2,615.77
Band H is £3,138.92
And, of course no-one pays more than Band H
Thanks
And agreed.
It seems to me that money is meant to move – to circulate through the economy and keep things ticking over. When too much of it is hoarded, the system starts to seize up. I can understand why some people, especially older folks (like me), save cautiously because they’re worried about things like care costs – that’s a sign the system isn’t providing enough security and something needs to be done about that too. But when the very wealthy accumulate more and more money without ever really needing to spend it, that’s a different issue entirely. It ends up pulling money out of the real economy.
So you’re right to focus on taxing the wealthy – not with a one-off “wealth tax,” but by properly taxing the income they get from wealth, which often escapes the levels of tax most workers pay on their wages. Getting that money moving again doesn’t just help make society fairer – it also reduces the need for government borrowing. If more tax is paid by those who can afford it, then the government doesn’t have to create quite so much money and take on as much “debt” to keep essential services running. It’s a moral argument and it’s a practical one too.
I am a fan of your work generally, so I have been surprised that you and people in this comment section have largely missed the point.
Wealth taxes are not meant to raise revenue. Some of those who discuss them do focus on the fiscal benefits, but as you note they are not an efficient method of taking money out of circulation.
But there is a broader reason to implement them; forcing the wealthy to sell assets, to stop upward redistribution, and removing liquidity from financial markets that have been deeply bloated by a decade and a half of QE.
Of course, there are criticisms to be made of the standard proposal – valuation is the big one, as you have pointed out. Additionally, it will hit the asset-rich-but-cash-poor the hardest, which in the short term could lead to further upward redistribution to the asset-and-cash-rich. Low rates such as eg 2% are meaningless if portfolios are providing a 3-5% annual return. Perhaps some less profitable assets might be disposed of to reduce the tax liability, but 2% would not be enough.
But this is why I believe any such tax would require higher taxes on wealth income; we must ‘choke’ the returns such assets can provide to realise the goals of a wealth tax, and spend a lot to increase the purchasing power of workers so that they may purchase assets.
Regarding valuation, I do agree that it can present a challenge. However, taxes on select assets (particularly housing/land) are superior to no asset taxes at all, and their valuation is less difficult. That is to say taxes like a Land Value Tax as proposed by Bryan.
We will have to disagree.
And these taxes are meant to raise revenue – or they do not work – and they are meant to assist redistribution. I am not sure your analysis or explanations of motivation wholly stack. Sorry.
I suppose you’ll only see this tomorrow morning, but that’s alright.
To be clear, I’m not saying Wealth Taxes shouldn’t raise revenue – obviously they should in order to function, I’m saying that it’s not the intended priority.
Taxing wealth income is a quicker and more effective way of raising revenue, but while it does remove money from the financial sector, it’s not as effective as wealth taxes could be in that regard. Higher eg CGT doesn’t put any pressure on the rich to sell things they do not require.
I am critical of existing proposals because, as I believe Stephanie Kelton has previously said, if it’s not impacting wealth distribution, why bother? But the answer is we need taxes that impact distribution, not that we should throw the baby out with the bathwater.
A wealth tax is not a viable proposal.
What I am suggesting is much more effective at redistribution as a result.
The trouble is that the NeoLabour government doesn’t want to tax the wealthy – it wants to find ways of transferring even greater amounts of wealth to the very wealthy and, if it taxes the wealthy, whom it sees as aspiring to become the very wealthy, then the sponsorship, (which is what donations are), and the support that it relies on in the upper reaches of the establishment to sustain their hold on power, will evaporate.
What it wants to achieve is to continue its sponsors’ programme of corporatisation of uk government and the uk public sector, which it funds very handsomely, whilst minimising its funding of infrastructure, social needs and welfare. It works to facilitate that by making the not-wealthy believe that what it is doing is in their best interests and that, after an unspecified period of hardship and deprivation for them, everything will be wonderful and the not-wealthy will prosper, which, of course, they won’t.
So really, what Labour is doing is playing for time to achieve a point of critical mass in their corporatisation venture, at which point the pretence will no longer be necessary, because they will have established techno-feudalism as the political status quo in the uk and handed over the mechanism and conduct of government to the private sector.
Its an exercise in government-managed and government-supported state capture and its goal is oppressive and total control of the citizenry and provision of a rightless labour force for exploitation by the nation’s corporate masters. It is similar to the Project 2025 goals, but without the evangelical and violent components present in the US realisation.
And taxing the wealthy is totally counterproductive to that goal. How much the government’s politicians and prime minister actually realise of what they are doing so is questionable, but that doesn’t matter too much, because they have already passed their strategic planning and decision-making functions to BlackRock, Palantir and the techbros and they are just fulfilling the role of senior civil service managers in the execution of their billionaire masters’ instructions.
One might reflect that the spoons that they have taken to the feast have been far too short.
You can tax wealth away once, but you can tax incomes (especially high incomes) forever.
The fundamental problem is not that some people are rich, but they accumulate more and more and get ever more wealthy, and that is at “expense” of the purchasing power of the majority. The rich do not spend all they have, or they would no longer be wealthy (in cash terms, at least), the overall result being a deficit of demand in the economy – most people don’t have enough to spend to generate the requisite demand and the rich won’t spend enough because they want to stay (cash) rich (or have such obscene wealth that they can’t think what to spend it on).
There’s a potential moral view to set to put forward, it’s OK to get or have got rich, we won’t take it away from you but if you think that you can get ever richer without doing anything but earning by virtue of being rich then that’s not acceptable and you will be appropriately taxed on that unearned income.
Wealth regenerates.
I clearly need to write about this.
It’s good that this debate is happening, and becoming more mainstream.
For 30+ years, very high incomes and very high capital gains have been taxed at too low levels. The result is obscene levels of wealth held by small numbers of people, millions on low-incomes struggling, and gross inequality of wealth.
Just how many £100s millions can people and families require, not just in one lifetime, but even across generations?
To address the scale of these societal issues and problems, Richard’s taxes are needed, step 1. Other taxes will also be required, step 2; and I think a wealth tax of some kind will have to be be among those.