Could a wealth tax work in the UK? A visual guide
That figure comes from a recent report by the National Institute of Economic and Social Research (NIESR), which blames the deficit on higher-than-expected borrowing levels and a weaker growth outlook for the UK economy.
The question now facing the chancellor is: who should pay more?
A growing chorus of voices across the Labour party say a wealth tax is the answer.
Politicians from across the divide have the habit of talking about wealth taxes in vague terms, often perpetuating misconceptions.
Here's a visual breakdown of the key elements of a wealth tax system. The analysis uses figures from the most in-depth study of a potential UK wealth tax so far, produced in 2020 by the Wealth Tax Commission, a panel of leading economists assembled by tax experts Arun Advani, Emma Chamberlain and Andy Summers.
Summers, director of CenTax and co-author of the 2020 study, said: 'Given the limited information HMRC currently hold on wealth, a wealth tax would be difficult to deliver any time soon. A better way to raise money from wealth would be to reform Capital Gains Tax (CGT). This is not just about raising rates. The Government should introduce an investment allowance and close gaps that currently allow some business gains to go completely untaxed. Doing this would be good for investment and growth, and raise over £13bn annually by the end of the Parliament.'
The Institute of Fiscal Studies has similarly argued that an annual wealth tax would be a 'poor substitute for properly taxing the sources and uses of wealth'. Treasury officials are understood to favour the latter.
Critics say a wealth tax would be too difficult and costly to implement, and that wealthy individuals would be able to move their holdings or to simply leave the country. They point to countries such as Austria, Denmark and Germany's decision to scrap similar taxes in the past.
However, other countries including Spain and Switzerland have been successfully using wealth taxes to raise significant sums for generations. In their letter to the government the economists in favour of a wealth tax argue that the UK can overcome these difficulties – by leveraging digital technology and studying previous attempts to tax wealth – and pioneer a progressive tax system 'fit for the 21st century'.
Tax revenue figures for income tax freeze, national insurance rise and pension contribution relief are taken from NIESR. The figures for capital gains equalisation are taken from the Centre for the Analysis of Taxation.
Wealth distribution by asset class data is taken from the ONS Survey of Personal Incomes 2022-2023. UK Wealth inequality data and figures on UK total wealth ownership are from 2023 and are provided by the Wealth Inequality Lab.
Wealth tax model and figures are from the Wealth Tax Commission (WTC) report and their 2020 tax simulator (the WTC study input figures are from 2018). The Guardian uprated the WTC figures by a nominal GDP increase of 39.13% between 2018 and 2025. 2018 GDP figures are from the ONS, while 2025 GDP figures are from the OBR. Figure adjustments by nominal GDP are rough estimates, conducted by the Guardian in consultation with the original researchers.
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