The introduction of a wealth tax could shift £100bn of wealth overseas or into less productive assets, according to Rathbones Group.

With Chancellor, Rachel Reeves, facing pressure to address a fiscal shortfall ahead of the Budget, the wealth and asset manager conducted economic analysis of previous wealth taxes.

Rathbones said that a wealth tax could cost the government £600m to set up, while ongoing compliance and administrative costs on taxpayers could total £700m a year.

It noted that administrative costs were a key driver in other countries abandoning wealth taxes, and were why the Labour government of the 1970s did not implement one.

Economists at Rathbones added that international experience of wealth taxes offered little encouragement, with the number of ‘rich’ countries levying wealth taxes having fallen from 12 to three since the 1990s.

“There is clear evidence that a recurring wealth tax would be economically damaging to the UK,” said Rathbones Group head of asset allocation and lead author of the analysis, Oliver Jones.

"Such a tax would require annual valuations of complex and illiquid assets - including private businesses, art, and intellectual property - for thousands of individuals. This process would be costly to administer, difficult to enforce, and could create significant economic distortions.”

Rathbones also highlighted that a wealth tax may encourage people to relocate or shift their holdings into assets that are treated more favourably under the tax.

The analysis of official UK economic data and a study on the impact of wealth taxes estimated that at least £100bn of assets could move abroad or into less productive assets if a wealth tax was imposed.

With more than a quarter of the UK’s billionaires being foreign nationals, Rathbones warned there was a high risk their flight would reduce the ongoing value of a wealth tax.

“Changes to the non-dom regime have already slowed the influx of the super-rich - and a wealth tax risk accelerating an exodus of wealthy individuals from the UK,” said Rathbones Private Office head of advice, Simon Bashorun.

“We have highly paid professional clients now looking to relocate to more tax-efficient jurisdictions like Dubai or Singapore. Many others may simply decide not to come here in the first place.

“In a world where countries are constantly competing to attract wealthy individuals and their tax dollars to bolster economic growth - something the UK is crying out for - we seem to be making it harder for ourselves to win.”

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