A new economic paper has warned that Britain already taxes wealth more heavily than any other advanced economy, casting doubt on the case for introducing an additional wealth tax.
The analysis, published by the Institute of Economic Affairs, argues that when property taxes, inheritance tax, stamp duty and capital gains tax are combined, the UK raises a larger share of GDP from wealth and wealth-related taxation than any other OECD country — including those European economies that have retained formal wealth taxes.
The findings challenge calls from some campaigners and commentators for a new levy on high net worth individuals, on the grounds that Britain is already at the upper end of international comparisons.
The paper’s author, Dr Kristian Niemietz, argues that proposals for a wealth tax would effectively layer a new charge on top of an already extensive system of asset-based taxation, rather than replacing or simplifying existing measures.
It points out that Spain, Norway and Switzerland — the only major European countries still operating explicit wealth taxes — raise less from wealth-related taxation overall than the UK once broader measures are included.
Supporters of a wealth tax have argued that it could raise significant additional revenue, with some estimates suggesting up to £25 billion a year. However, the paper questions both the feasibility and durability of such projections, arguing that a narrow tax base would make sustained revenues difficult to achieve.
Current proposals typically focus on individuals with wealth above £10 million, a group estimated at around 32,000 households in the UK. The paper contrasts this with France’s former wealth tax, which applied to more than 360,000 taxpayers before it was eventually abolished.
It argues that concentrating liability on a relatively small group would increase incentives for tax planning, asset restructuring and relocation, potentially eroding the expected yield over time.
The paper also challenges the argument that wealth inequality in the UK is unusually high by international standards. It estimates that the top 1 per cent of households hold around 22 per cent of total wealth, a figure below the EU average and significantly lower than in the United States.
On that basis, it suggests that the UK does not present a clear structural justification for an additional layer of wealth taxation compared with peer economies.
Instead of a wealth tax, the report recommends policies aimed at broadening asset ownership across the population.
One proposal is pension reform along the lines of Australia’s superannuation model, which replaces a largely pay-as-you-go system with compulsory, savings-based retirement accounts designed to build private wealth over a working lifetime.
A second recommendation focuses on increasing housing supply, arguing that Britain’s long-standing shortage of new homes has limited access to property wealth, particularly among younger age groups.
It notes that home ownership rates among people in their early 30s have fallen sharply over recent decades, and argues that a sustained increase in construction could have a broader impact on wealth distribution than additional taxation at the top end.
The paper concludes that efforts to improve wealth distribution should focus on expanding ownership opportunities rather than introducing new taxes on a narrow segment of the population, warning that the latter risks reducing investment without delivering significant long-term revenue gains.
Dr Kristian Niemietz, Editorial Director and Head of Political Economy at the Institute of Economic Affairs, said:
“The current hype around wealth taxes is entirely vibes-based, and completely undeserved. Wealth taxes have been tried many times before, and no actually existing wealth tax has ever come close to delivering what its keenest supporters are promising today.
“Among economists, even those who are sympathetic to wealth taxes in principle concede that it comes with a myriad of practical problems and harmful side-effects.
“Everything wealth tax campaigners are trying can be better achieved in other ways. There are vastly superior alternatives to wealth taxes.”
Dan Neidle, Founder of Tax Policy Associates added: “The UK’s greatest problems are anaemic economic growth and a lack of supply of housing.
“An annual wealth tax offers no solution to either, and risks actively hindering the growth we desperately need.
“This paper does an important job of shifting the debate: if we want to tackle inequality, the answer isn’t an unworkable new tax; it’s building homes and letting more people build wealth of their own.”
The Rt Hon Lord Frost, Senior Policy Fellow ar the Institute of Economic Affairs, said: “Wealth taxes are panacea policies, fantasy solutions advocated by those who don’t want to face up to the task of implementing an economic strategy that will genuinely make us richer and more prosperous. What Britain needs is less spending and lower taxes, not another effort to extract even more from hard-pressed businesses and voters.”
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