But there is room for higher levies on the income that people get from their savings, investments and property.
Conservative politicians and free-market economists have hit out at the idea, claiming that it would drive entrepreneurs out of the UK and harm the economy.
The classic wealth tax would see people hand over a certain amount of their worth to the Exchequer each year, above a threshold designed to exempt the vast majority of Britons from paying anything.
Former Labour leader Neil Kinnock thinks billions can be raised from a wealth tax (Photo Tom Pilston)
Green Party policy is a 1 per cent tax on wealth over £10m, rising to 2 per cent over £1bn.
Unite, one of the country’s biggest trade unions, backs a 1 per cent tax on £4m, claiming it would raise £25bn a year.
Levelling up capital gains tax
At the last Budget, Rachel Reeves increased capital gains tax rates – but they are still lower than income tax. Higher-rate taxpayers must pay 24 per cent on most profits from investment, less than the 40 or 45 per cent levied on income.
He told The i Paper: “The starting point is that a wealth tax could not be implemented very quickly, because you would need to set up an asset register so that the Government knows exactly what it is taxing. It would be much easier to increase tax on income from wealth, such as capital gains tax, because the Government already has the data that it would need.”
Chancellor Rachel Reeves increased capital gains tax rates in her first Budget but they are still lower than income tax rates. (Photo: Maja Smiejkowska/Reuters)At the moment, you would be unlikely to have to pay any capital gains tax on an inherited asset if you sold it immediately after you received it, because its value would be unlikely to have risen in that time.
Currently, national insurance is paid primarily on income from work and not on the proceeds of wealth – such as rent received by landlords, dividends and pensions.
He said: “Our view is that the first thing we should do is look to iron out the unequal tax treatment of different types of income. We could think about broadening the types of income that national insurance is applied to, and you could also think about bringing the rates of capital gains tax and income tax into better alignment. The reason we would go there first is that you could both have a more fair tax system, and improve economic efficiency.”
Property taxes
Houses on expensive streets like Kensington Palace Gardens could be hit by higher council tax bands (Photo by Oli Scarff/Getty)
This could be done through the existing council tax system, with extra bands applied beyond the current maximum band H, or through a separate new tax.Corbett said that the burden of paying council tax should shift from the occupier of a property to its owner, meaning that landlords, rather than tenants, would be taxed on the value of rented accommodation.
What the Government will do
Reeves has dropped her public opposition to a wealth tax, in an apparent bid to keep her options open ahead of a tricky Budget in the autumn.
Labour insiders have suggested that instead, she will aim to ensure that the burden of higher taxes continues to fall on richer individuals, to show MPs they are being listened to.
A Downing Street spokesman said: “We’ve always been clear that those with the broadest shoulders should carry the greatest burden, but we back wealth creation. The best way to strengthen the public finances is by growing the economy. That’s our number one priority. That’s our focus. And changes to tax and spend policy are not the only way to do it, as seen with our planning reforms.”
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