What is a wealth tax, how would it work in the UK and where else has one?

Published

2 months ago

August 1, 2025

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The idea of a wealth tax has raised its head – yet again – as the government attempts to balance its books.

Downing Street refused to rule out a wealth tax after former Labour leader Lord Kinnock told Sky News he thinks the government should introduce one.

Sir Keir Starmer’s spokesman said: “The prime minister has repeatedly said those with the broadest shoulders should carry the largest burden.”

While there has never been a wealth tax in the UK, the notion was raised under Rishi Sunak after the COVID years – and rejected – and both Harold Wilson’s and James Callaghan’s Labour governments in the 1970s seriously considered implementing one.

Sky News looks at what a wealth tax is, how it could work in the UK, and which countries already have one.

What is a wealth tax?

A wealth tax is aimed at reducing economic inequality to redistribute wealth and to raise revenue.

It is a direct levy on all, or most of, an individual’s, household’s or business’s total net wealth, rather than their income.

The tax typically includes the total market value of assets, including savings, investments, property and other forms of wealth – minus a person’s debts.

Unlike capital gains tax, which is paid when an asset is sold at a profit, a wealth tax is normally an annual charge based on the value of assets owned, even if they are not sold.

A one-off wealth tax, often used after major crises, could also be an option to raise a substantial amount of revenue in one go.

How could it work in the UK?

Advocates of a UK wealth tax, including Lord Kinnock, have proposed an annual 2% tax on wealth above £10m.

Wealth tax campaign group Tax Justice UK has calculated this would affect about 20,000 people – fewer than 0.04% of the population – and raise £24bn a year.

Because of how few people would pay it, Tax Justice says that would make it easy for HMRC to collect the tax.

The group proposes people self-declare asset values, backed up by a compliance team at HMRC who could have a register of assets.

Which countries have or have had a wealth tax?

In 1990, 12 OECD (Organisation for Economic Co-operation and Development) countries had a net wealth tax, but just four have one now: Colombia, Norway, Spain and Switzerland.

France and Italy levy wealth taxes on selected assets.

Colombia

Since 2023, residents in the South American country are subject to tax on their worldwide wealth, but can exclude the value of their household up to 509m pesos (£92,500).

The tax is progressive, ranging from a 0.5% rate to 1.5% for the most wealthy until next year, then 1% for the wealthiest from 2027.

Norway

There is a 0.525% municipal wealth tax for individuals with net wealth exceeding 1.7m kroner (about £125,000) or 3.52m kroner (£256,000) for spouses.

Norway also has a state wealth tax of 0.475% based on assets exceeding a net capital tax basis of 1.7m kroner (£125,000) or 3.52m kroner (£256,000) for spouses, and 0.575% for net wealth in excess of 20.7m kroner (£1.5m).

The maximum combined wealth tax rate is 1.1%.

The Norwegian Labour coalition government also increased dividend tax to 20% in 2023, and with the wealth tax, it prompted about 80 affluent business owners, with an estimated net worth of £40bn, to leave Norway.

Spain

Residents in Spain have to pay a progressive wealth tax on worldwide assets, with a €700,000 (£600,000) tax free allowance per person in most areas and homes up to €300,000 (£250,000) tax exempt.

The progressive rate goes from 0.2% for taxable income for assets of €167,129 (£144,000) up to 3.5% for taxable income of €10.6m (£9.146m) and above.

It has been reported that more than 12,000 multimillionaires have left Spain since the government introduced the higher levy at the end of 2022.

Switzerland

All of the country’s cantons (districts) have a net wealth tax based on a person’s taxable net worth – different to total net worth.

It takes into account the balance of an individual’s worldwide gross assets, including bank account balances, bonds, shares, life insurances, cars, boats, properties, paintings, jewellery – minus debts.

Switzerland also works on a progressive rate, ranging from 0.3% to 0.5%, with a relatively low starting point at which people are taxed on their wealth, such as 50,000 CHF (£46,200) in several cantons.

Politics

Labour and the Lib Dems could take lessons from how Farage ‘hogs the headlines’

Published

2 hours ago

September 22, 2025

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Labour and the Lib Dems could take lessons from how Farage 'hogs the headlines'

This is the story of two announcements – and the bigger lessons they tell us about the state of our politics.

First, there was a policy announcement by the Liberal Democrats as they gathered in Bournemouth for their annual conference.

Some Lib Dems were already aggrieved they do not get coverage commensurate with their parliamentary strength, given they have 72 MPs. But there is no one outlet or platform choosing to downplay their content – it’s worth analysing why their work does not travel further and wider.

The party’s main overnight policy call was for health warnings on social media apps for under-18s. The reason this was unlikely to garner a huge amount of attention is because it broadly falls in line with existing mainstream political consensus.

Politically, it was a safe thing to call for, tying gently the party’s anti-big tech and by extension anti-Trump agenda, but it was such safe territory that The Times reported this morning that ministerial action in the same area is coming soon.

Perhaps more importantly, the idea of mandatory warnings on social media sites used by teens feels like small beer in the age of massive fiscal and migration challenges. The party conference is its big moment to convince the public it’s about more than stunts and it can pose a coherent alternative: do its announcements rise to such a big moment?

Even more depressing for activists in Bournemouth is that the Liberal Democrat announcement is being eclipsed by Nigel Farage’s immigration statement. This is rightly getting more coverage – although also rightly, much of it focuses on whether this latest plan can possibly work, whether they’ve thought it through and whether their cost estimate is credible (probably not).

Even typing these words will draw a backlash from the parts of the political spectrum who resent the scale of the coverage a party with five MPs can muster. But just as the Lib Dems might draw lessons from their own failure to get noticed, Labour could do worse than to take note of why Reform leader Mr Farage is again hogging the headlines today.

Reform UK is proposing two things: that it will end Indefinite Leave to Remain (ILR) as we know it – that’s the right to settle in the UK, with access to benefits, after five years in the country. Within 100 days of entering office, Mr Farage says people would have to apply for five-year visas, qualifying only if they meet a higher salary threshold – closer to £60,000, from just over £40,000.

There are questions about the practical workings of the policy – a vastly bureaucratic and potentially destabilising plan to assess old IRL claims seems at odds with their plans to slash the size of the state. Some rival politicians would query the ethical stance of their latest intervention.

And Labour is loudly saying that Reform’s claim that UK benefits will be restricted to UK citizens will generate savings in the hundreds of billions is based on thinktank research that has since been withdrawn. But that is secondary.

The bigger thing Reform UK has done today is identify and loudly highlight an issue the Labour Party agrees with but does not dare make a big deal of. This allows Reform UK once again to set the terms of the debate in a sensitive area.

Underlying the Reform UK policy is a simple set of figures: That the result of the huge migration surge triggered by Boris Johnson and overseen through the Liz Truss and Rishi Sunak premierships, means those eligible for Indefinite Leave to Remain, five years after their arrival, is about to spike. This poses profound and complex questions for policymakers.

According to the government, last year 172,800 got Indefinite Leave to Remain. From next year there are estimates – not challenged this morning by the government when I checked – that about 270,000 migrants will become eligible to apply to live in the UK permanently. Then, up to 416,000 people will qualify in 2027, and 628,000 in 2028. These are huge numbers.

And here’s the key thing. While in public Labour have been trying to highlight aspects of this announcement that they say have “fallen apart”, privately they acknowledge that this is a problem and they too will come up with solutions in this area – but cannot yet say what.

Labour have already said they will increase the qualifying period for Indefinite Leave to Remain from 5 to 10 years, but it is unclear what will happen to those for whom the clock is already ticking – so, those in this coming wave. More on that is expected soon, but this is uncooked policy and the government is now racing to provide an answer.

We seem to have politics stuck on repeat. Mr Farage has yet again put up in lights something that Labour privately concede is an issue but as yet have no answer in public. New home secretary Shabana Mahmood knows she has to show she can be quicker off the mark and more punchy than her predecessor – her rival has been first off the mark in this area, however.

But Mr Farage is also tackling the Tories too, punching the bruise by labelling the surge in migration post-2021 as the “Boris-wave”. Understandably, the Tories themselves have been shy to dwell on this. But they have also tried to make it harder for people who arrived post-2021 to get ILR and have vowed to allow those on benefits to be able to apply. But they would draw the line on retrospective ILR claims, which could turn into one of the big dividing lines at the next election. And they are not shouting about a plan which effectively criticises the migration record of the last government.

Mr Farage has come up with a deeply controversial policy. Retrospectively removing people who thought they could live indefinitely in the UK is a major shift in the compact the UK had with migrants already here. But he managed to put his rivals in a tangle this morning.

The two biggest parties give the impression they still have little confidence when dealing with migration. Until they do, can they really take on Mr Farage?

Politics

Sir Ed Davey refuses to rule out deal with Sir Keir Starmer to stop Reform winning power

Published

2 hours ago

September 22, 2025

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Sir Ed Davey refuses to rule out deal with Sir Keir Starmer to stop Reform winning power

Sir Ed Davey has refused to rule out striking a deal with Sir Keir Starmer in order to stop Nigel Farage from entering Number 10.

Speaking to Sky News’ political editor Beth Rigby, the Liberal Democrat leader said he would “wait to see the result of the next election” before deciding on any agreement with Labour.

Asked whether he would ever do a deal with Sir Keir, the party chief said: “Look, when it comes to deals with other parties beyond Reform, let’s wait to see the result of the next election.”

Politics latest: Farage announces plan to deport legal migrants

Sir Ed, who was speaking during the party’s conference in Bournemouth, categorically ruled out doing any kind of deal with Mr Farage’s party, despite its current lead in the polls.

He said: “That’s not going to happen. The truth is with the Reform Party, they represent values which are the complete polar opposite.”

The Lib Dem leader said he believed Mr Farage was seeking to mimic the politics of US President Donald Trump.

“I think people are worried about the direction of our country, because often in the past, sometimes we have seen a bit of American influence in our country,” he said.

“We’re seeing a lot more of it. And people look at Trump’s America and what he’s doing to it and are really fearful for democracy.”

‘If we win the right seats, it stops Reform getting a majority’

Asked whether he felt he had a “moral responsibility” to keep Reform out of power by forming an alliance with other progressive parties, Sir Ed suggested it was not necessary because “we can stop Reform by ourselves”.

“If Liberal Democrats keep winning seats and build on our best result for 100 years, at the last general election, we can stop Reform by ourselves,” he said.

“We can deprive them of the seats that they would need to form a majority. And then the arithmetic of them getting to power falls to pieces.

“If we win the right seats, it stops them getting a majority and I am determined to target our resources to stop them winning the seats that will put them into power. And that’s because in our elections, it’s seat by seat, so many seats we took off the Tories last time, if we hadn’t done, Reform might have done.”

He added: “We didn’t have pacts last time. We’re not going to have pacts in the future.”

Sir Ed has been the only English party leader to explicitly criticise Mr Trump, and even refused an invitation to the state banquet with the King at Windsor Castle as part of the US president’s state visit last week.

He has also criticised on Sky News’ Sunday Morning with Trevor Phillips the president’s former ally Elon Musk, branding the billionaire tech tycoon a “criminal” for “allowing online harm to children” on his social media platform X.

The Lib Dem leader refused to apologise for the remark and denied it was “irresponsible” to call Mr Musk a criminal when no charges had been laid against him.

He said he was not concerned about being sued by Mr Musk – who has previously called Sir Ed a “snivelling cretin”.

Will Davey continue with his stunts?

Elsewhere in the interview, Sir Ed was challenged about his leadership style and whether the publicity stunts he famously relied on in the election were “appropriate” when the country was going through profound political and economic challenges.

Beth Rigby highlighted reports showing that his own MPs had expressed a desire for their leader to “drop bullshit stunts and raise your game”.

In response, Sir Ed said he didn’t think politics was “a joke” and that he was able to make “serious points” while engaging in stunts to attract attention.

“What happened was the cameras came there and they interviewed me and allowed me to give my serious points,” he said.

“And, in previous elections, we haven’t been able to do that. And when I was able to give the serious points on behalf of Liberal Democrats, we got our best result for 100 years.”