Introducing a two per cent minimum annual tax on households with more than £100 million in wealth could raise around £10 billion in 2026, while affecting fewer than 1,000 households in the UK, suggests a report by academics at King's College London, the Paris School of Economics and the University of California, Berkeley.
"Wealth taxes have too often been dismissed as politically attractive but practically impossible. This report shows that a well-designed minimum tax on the very wealthiest households is a realistic, targeted reform that would make the UK's tax system fairer while raising substantial revenues."
Dr Ben Tippet, School of Global Affairs, King's College London
The UK's richest households have become dramatically wealthier over recent decades while often facing lower effective tax rates than ordinary workers.
The report from Dr Ben Tippet from King's School of Global Affairs and Professor Gabriel Zucman of Paris School of Economics and University of California, Berkeley estimates that the wealth of the richest 300 UK households has risen from around 5 per cent of GDP in 1989 to around 16 per cent today.
The proposed reform would require ultra-high-net-worth households with more than £100m to pay a minimum effective tax rate equivalent to 2 per cent of their total wealth, with any income taxes already paid deducted from this liability. Households already paying the equivalent of 2 per cent of their wealth in tax would pay nothing extra.
Key findings of the report include:
- £10.4 billion could be raised in 2026 - 10 times the estimated savings from cutting the 2024/25 Winter Fuel Allowance. £10.4 billion would reduce the UK's projected current budget deficit by almost one-third.
- Fewer than 1,000 households would be subject to the tax, substantially limiting administrative costs, which are estimated at less than one per cent of revenues.
- Households with more than £100 million in wealth would remain within the scope of the tax for up to ten years after ceasing UK residence to limit migratory responses - building on the principle recently introduced for the UK inheritance tax.
- This proposal fills a gap which even reforming capital gains tax and inheritance tax cannot fix. This is because the wealth of the super-rich is held in assets that can be accumulated for decades and borrowed against without ever triggering a taxable event. This proposal tackles this directly by taxing wealth itself.
- Revenues would continue to grow over time, reaching almost £18 billion annually by 2036.
- Nearly half of all revenues would come from fortunes primarily built in finance, real estate and land.
The report argues that, unlike previous wealth taxes, the proposal is deliberately targeted at only the very wealthiest households. Because of the high £100 million threshold, HMRC could concentrate compliance, valuation and enforcement resources on a very small number of taxpayers, making the policy substantially more administratively feasible than historic wealth taxes.
The authors also propose that households above the threshold would remain liable for the tax for up to ten years after leaving the UK, reducing incentives for tax-motivated migration and building on similar and recent reforms to UK inheritance tax rules.
Dr Ben Tippet, Lecturer in Economics and Wealth Inequality, King's College London said: "A minimum two per cent tax on the total wealth of households with more than £100 million would raise around £10 billion every year while affecting fewer than 1,000 households. Because the tax is so tightly targeted, the familiar criticisms of wealth taxes - administrative complexity, asset valuation, liquidity constraints and impacts on entrepreneurs - do not hold. With a ten-year post-emigration liability, modelled on recent inheritance tax reforms, and rapid implementation to prevent pre-emptive relocation, the proposal is both practical and enforceable. HMRC has already started collecting information on the wealth of billionaires needed to administer it.
"Wealth taxes have too often been dismissed as politically attractive but practically impossible. This report shows that a well-designed minimum tax on the very wealthiest households is a realistic, targeted reform that would make the UK's tax system fairer while raising substantial revenues."
Professor Gabriel Zucman, Paris School of Economics and University of California, Berkeley, said: "Across many countries the super-rich pay lower effective tax rates than the rest of society. A two per cent minimum wealth tax for households with more than £100 million in wealth fixes this problem, while raising £10 billion a year. But most crucially, this is feasible. Given the small numbers of households that would be taxed, the UK government could implement this quickly."
