What Is a Wealth Tax, How Would It Work in the UK, and Where Else Has One?

Economy & Policy Desk | 22 July 2025

As the cost-of-living crisis and calls for fairer taxation dominate public debate, a once-taboo idea is gaining renewed attention in the UK: a wealth tax.

But what exactly is a wealth tax, how might it work in the UK, and which countries are already using one?

What Is a Wealth Tax?

A wealth tax is a tax levied on an individual's net wealth—that is, the total value of assets owned (such as property, investments, and savings) minus any debts or liabilities.

Unlike income tax, which targets earnings, a wealth tax is based on the accumulated value of what someone owns. It is typically applied annually and aimed at individuals or households with assets above a certain high threshold.

How Could It Work in the UK?

While the UK currently taxes income, capital gains, and inheritances, it does not have a direct wealth tax. Proposals from think tanks and campaigners suggest several models:

• Threshold-based Tax: For example, a 1–2% annual tax on net wealth above £10 million.
• One-Off Levy: A temporary wealth tax—such as a one-off charge on wealth over £1 million—to help recover from crises like COVID-19 or fund public services.
• Progressive Wealth Tax: Higher rates for those with greater wealth tiers, similar to how income tax bands work.

The Wealth Tax Commission, a joint academic project, estimated that a one-off tax on wealth over £1 million could raise over £260 billion for the Treasury.

Critics argue it could lead to capital flight, deter investment, or be difficult to administer. Supporters claim it could reduce inequality and ease the burden on working households.

         Will Chancellor Rachel Reeves and Prime Minister Sir Keir Starmer impose a wealth tax? Pic: PA

Where Else Has a Wealth Tax?

Wealth taxes are relatively rare and have been phased out in many countries due to administrative difficulties and low revenue returns. However, a few still use them:

• Spain: Has a national wealth tax with regional variations. Rates range from 0.2% to 3.5% on wealth over €700,000.
• Norway: Applies a 0.85% annual tax on net wealth above NOK 1.7 million (around £125,000).
• Switzerland: Has a cantonal-based wealth tax system with rates and thresholds varying widely.

Other countries, like France, Italy, and Germany, abolished their wealth taxes in recent decades due to economic concerns.

Could It Really Happen in the UK?

Although no major UK political party currently supports a wealth tax, recent public polling suggests growing support—especially among younger voters and those hit hardest by austerity and inflation.

With inequality rising and public finances stretched, pressure is mounting for policymakers to consider more radical reforms. Whether that includes a wealth tax depends largely on political will—and how the debate over fairness and economic growth evolves in the coming years.