Home Business NewsBusiness Five-year wealth tax plan could push thousands into debt

Five-year wealth tax plan could push thousands into debt

by LLB Editor
9th Dec 20 11:30 am

A new wealth tax would target thousands of UK households who are not particularly wealthy and push them into debt and hardship, say leading tax and advisory firm Blick Rothenberg

Nimesh Shah, CEO at the firm said: “A report from the Wealth Tax Commission suggests that people who have assets as low as £500,000 or £1 million for a married couple would have to value their worldly assets including their main home and pension pots, deduct any liabilities like mortgages, and then pay 1% tax on their total assets.”

“When wealth taxes have been discussed in the past, it was expected that certain assets such as the main home and pensions would be excluded, but the Wealth Tax Commission argues that this should not be the case.”

He added: This could push thousands of households who may be asset but not cash rich, into debt. A family owning a detached house in Southern England with modest pension and ISA savings could easily be caught.”

Nimesh said: “ There is a serious question around how someone pays a wealth tax if they do not have the immediate cash liquidity – they are ‘asset rich but cash poor’. The Wealth Tax Commission notes that 570,000 people may be liquidity constrained at the £500,000 wealth threshold, and an instalment payment mechanism would need to be introduced ‘to reduce unnecessary hardship’ – it is worrying that a new form of tax could force people into hardship and a serious re-think would needed.”

He added: “Pensioners who fund their living costs through savings, farmers owning agricultural land and private business owners will all be concerned by the proposals and how they will feasibly fund the tax – these groups may need to burden themselves with debt to pay the tax, although this may not be an option or cost effective for everyone e.g., the elderly.”

Nimesh said: “Wealth is more mobile than ever, and such a measure could push individuals away from UK shores, which would see revenues from other taxes decrease as a result. Entrepreneurs and their businesses are equally internationally mobile, especially technology focussed businesses. Recent tensions around future tax rises, in particular capital gains tax, risk damaging the UK’s reputation as a centre for international business at a time when the Government should be doing all it can to keep the UK competitive under the backdrop of Brexit.”

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