Almost half of UK adults would support introduction of wealth tax at Budget

Over two in five (44 per cent) people in the UK would support the introduction of a wealth tax as a percentage of total assets, while only 23 per cent of people are against it, research from AJ Bell has found.

The firm asked respondents about potential tax changes at the upcoming Budget, with 63 per cent worried about possible tax rises that could affect them personally.

However, this was down from 67 per cent of people who were concerned ahead of the previous Budget.

More than two fifths (41 per cent) of people wanted taxes to be lowered at the Budget, while 23 per cent wanted them to increase and 18 per cent wanted them to be raised, but not for people like them.

The most feared potential Budget changes were an increase in fuel duty (50 per cent), raising income tax (41 per cent), frozen income tax thresholds (39 per cent), and raising employee National Insurance (37 per cent).

Meanwhile, the possible Budget changes that people were most likely to hope for were an increase in the personal allowance (61 per cent), a wealth tax as a percentage of total assets (44 per cent), increased defence spending (41 per cent), and changing council tax (38 per cent).

Inheritance tax (IHT) was identified as one of the most divisive potential Budget changes, with 32 per cent and 33 per cent for and against cutting IHT breaks respectively, and 24 per cent and 34 per cent for and against reducing gifting allowance respectively.

“The past couple of Budgets have marched noisily towards us for months, accompanied by a cacophony of leaks, rumours and alarm bells,” said AJ Bell head of personal finance, Sarah Coles.

“This one is sneaking up on us more stealthily. It’s one reason why the level of anxiety is slightly lower.

“However, while we’re not being deafened by Budget speculation, more recently rumours have started to rumble, from a possible change to tax on holiday lets to calls from some quarters to increase capital gains tax and suggestions the threshold for the mansion tax might drop from £2m to £1.5m – doubling the number of people affected to 300,000.”

On the general support for a wealth tax, Coles noted that this was likely due to fact that many people assumed the wealth cut off will exclude them from the tax.

“In reality, this kind of tax is fraught with difficulties, including for those who may live in expensive properties but have a lower income, so would struggle to pay the bills,” she continued.

“It would also be expensive to implement, because it would involve calculating the value of people’s total assets. Plus, it risks not raising as much as initially expected, because people can structure their finances to ensure they pay less tax.

“This is one reason why the wealth tax that tends to be floated alongside Budget speculation more often is capital gains tax.

“It has been the target of both rate hikes and allowance cuts in recent years, but it’s difficult to know whether more rate rises would end up raising any more cash, or whether people would just change their behaviour to get around the tax.

“Nonetheless, it’s clear that the environment isn’t likely to get more generous towards the treatment of wealth, so if you have assets outside ISAs and pensions, and the relevant available allowances, it’s well worth considering protecting them from tax.”

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