A wealth tax looks dead in the water. Reeves has other options

Telegraph

6 days ago

Finally, the proponents of a wealth tax have so far focused on lazy, big-picture claims that overlook the details of how such a tax would work. What assets would it be levied on? Would just UK assets or worldwide ones be in scope? How would it be collected? Could HMRC even do it? The Treasury has done a lot of thinking about how to tax wealth more and is well aware that to be effective, any tax increase on the very rich has to be almost impossible to avoid. I suspect once they got into the details, they would swiftly work out that this type of levy would be easily dodged.
That's the good news. The bad news is that the Treasury certainly has views on how and why tax on wealth should be increased. Work will be underway to give the Chancellor a menu of options that mean she can dismiss this specific proposal as unworkable while pleasing backbenchers with an alternative tax raid on wealth.
When I was at the Treasury, there were frequent mutterings from officials about the unfairness of taxing labour more than capital, and a lot of work looking at how to tackle intergenerational issues through inheritance tax and property taxes. I suspect this will be dusted down and presented as the answer to the Chancellor's fiscal and political problems.
What might a wealth tax raid that isn't a wealth tax look like? The big area of focus will be property. Officials are very taken with the premise that recurring taxes on immovable property are the best way to increase the amount the wealthiest pay. So, if they want to work within the current system, we could see changes to council tax. Despite being delayed a bit, the Labour Government in Wales is committed to a council tax revaluation that Westminster could replicate. This would be done under the guise of fairness and would result in more expensive homes paying higher council tax. Alternatively, the Government could opt to add a new council tax band under existing valuations. A mansion tax like this might raise a few billion.
More radical would be reform of the Primary Residence Relief (PRR) that exempts family homes from capital gains tax. This relief costs nearly £40bn a year, so even restricting it in a small way, such as levying it only on homes worth over £2m, might raise a few billion. PRR appeared on a list of options in the run-up to the Autumn Statement of 2022, but Jeremy Hunt, the then chancellor, had no intention of going near such an explosive policy. His successor may well view the idea differently.
I would be surprised to see anything as complicated as this, but initial work was started last year on replacing all of our current property taxes (council tax, stamp duty and capital gains tax on property) with a new annual property levy. There has been no pitch rolling for this sort of approach, so I suspect moves will be limited to reforming council tax or PRR, plus some tinkering with stamp duty.
More straightforward would be simple increases to capital gains, inheritance and dividend taxes. All of which could be dressed up as taxing the wealthy and could raise an extra few billion in combination. Increasing dividend tax and capital gains tax further towards income tax rates would certainly appeal to the Treasury's instincts that capital should not be taxed much less than labour.
All of which means we may well see a specific new wealth tax ruled out more formally. But that does not mean a suite of wealth taxes isn't on the cards for the autumn Budget.