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The Independent
5 days ago
- Business
- The Independent
Why experts think a UK wealth tax is ‘naive'
Experts caution that a wealth tax to address the UK's public finance deficit would be "naive" and largely ineffective, citing a lack of success stories internationally. Leading tax lawyer Dan Neidle suggests a wealth tax could detrimentally affect the UK's overall tax revenue, arguing it is arrogant to assume the UK could succeed where other nations have failed. Economists highlight the significant practical challenges of implementing a wealth tax, including complex asset valuation, high administrative costs, and potential liquidity issues for taxpayers. IFS economist Stuart Adam said most developed countries have abandoned annual wealth taxes, with experts advocating for alternative reforms to capital income taxes as more realistic. Concerns exist that a wealth tax might prompt wealthy individuals to reallocate assets or alter their residency status, potentially leading to a net loss for the Treasury rather than increased revenue.
The Independent
5 days ago
- Business
- The Independent
‘Naive and arrogant': Why a wealth tax in the UK would fail, according to experts
Any attempt by Rachel Reeves to plug the gap in the UK's public finances through a wealth tax would be 'naive', with very few success stories from other nations, experts have warned. The chancellor may need to find as much as £30bn in savings through either cutting costs or raising taxes ahead of her Budget, with Keir Starmer's government under pressure to find ways of raising funds for the public purse. But leading tax lawyer Dan Neidle, now of Tax Policy Associates, claims a wealth tax would actually have a detrimental effect on the UK's tax take – and that the government would be 'arrogant' to think it would work in this country. 'What's being proposed is radically different from every other existing wealth tax. Current real world wealth taxes are either full of loopholes so the mega wealthy don't pay (such as Spain), apply to the middle class (Norway), or both (Switzerland),' Mr Neidle told The Independent. 'The idea that we can do something different is naive. It's arrogant to think that we in the UK can achieve a holy grail everyone else has been too stupid to find.' A wealth tax is essentially a way of taxing the total value of an individual's assets, rather than just their income, Deutsche Bank's chief UK economist Sanjay Raja explained. That can be on assets such as property or shares, but also luxury goods, cash, bonds or other valuables. Mr Raja warned that a wealth tax is not only difficult to implement but also costly and requires close monitoring, including regularly valuing assets. 'From an economics view, the advantage of a wealth tax is that it reflects someone's long-term ability to pay or contribute to government finances, as opposed to being taxed solely on their income tax,' he told The Independent. 'In theory, the aim would be to reduce economic inequality, since wealth tends to be more concentrated than income. 'In reality, it's very difficult to implement wealth taxes. Issues around asset valuation on businesses or real estate makes it difficult, complex, and costly to do across an entire country. It requires significant upskilling, infrastructure capacity and personnel to implement effectively and fairly. 'There is also a big problem of liquidity. On paper, some people may be classified as 'wealthy' or meet the threshold for a wealth tax – however, in practice, they may lack the cash to pay the tax given illiquidity of some assets.' When it comes to taxing the wealthy, plenty of nations have taken a similar approach. There are not, however, too many nations who would say their method has been an unmitigated success. Stuart Adam, a senior economist at IFS, pointed out that plans in other countries have been ditched along the way, with other changes to taxation offering more realistic and successful long-term outcomes. 'International experience of annual wealth taxes is not encouraging – they have been abandoned in most of the developed countries that previously had them,' Mr Adam said. 'There are strong reasons to radically reform how we currently tax the sources and uses of wealth; this includes reforming capital income taxes in order to properly tax high returns. An annual wealth tax would be a poor substitute for doing that.' Chris Etherington, private client tax partner at RSM UK, added that people affected by any change in tax rulings could be more likely to simply reallocate assets accordingly – if they could even be properly assigned a taxable value in the first place. 'There are huge practical challenges with introducing a wealth tax, in particular the need to regularly value assets and agree these with HMRC,' he said. 'Those affected are likely to change their behaviour and circumstances in response to a wealth tax. It might result in a redistribution of wealth amongst someone's family, rather than benefitting the wider UK population. 'A number of countries have experimented with wealth taxes over the years, but there are few success stories, and many have repealed them. There are simply easier ways of generating additional tax receipts.' Mr Neidle explained the process wealthy individuals would take in determining whether the approach being considered for the UK would be prohibitive for them – and why the idea of the super rich fleeing the UK is not exactly what it seems. Generally speaking, it's accepted that investors may look to achieve long-term average returns of eight per cent or so. While that may differ wildly between different types of investment, it gives a starting point for working out how much a tax may impact when it's on more than just income. 'A 2 per cent wealth tax doesn't sound like much, but for someone earning an 8 per cent return on their assets, that plus existing dividend tax creates an effective rate of 60 per cent - and on a year when assets decline, an effective rate of over 100 per cent,' Mr Neidle explained. 'That creates an incentive to avoid the tax out of all proportion. 'The tax would apply to just a few thousand people but these are some of the most mobile people in the world. Often they live in several countries, spending a few months a year in each. Asking whether they will 'leave' the UK is the wrong question; it's whether they spend a bit less time in the UK and become non-resident.' The final argument may, perhaps, come down to whether such a move to bring in a wealth tax – or any other type of tax – raises more money, or sees more money leave the country. One report by the Centre for Economics and Business Research think tank estimated that if more than 25 per cent of non-doms departed the UK, the overall change would be a net cost to the Treasury. In terms of what has been seen elsewhere already, the answer is clear, insisted Mr Neidle. 'Conventional wealth taxes have been estimated to retard an economy by 1 per cent. The uber-wealth taxes being proposed would be more dramatic still,' he said. 'The wealth tax is the ultimate in the fantasy view we can get something for nothing, tax other pdaneople and raise lots of money with no consequence. There are always trade-offs, and the downsides of the wealth tax are particularly severe.'
Scottish Sun
5 days ago
- Business
- Scottish Sun
HMRC slaps huge £1,600 fines on 600,000 struggling families who don't even owe tax
We've explained how to avoid it in the first place TAXING TIMES HMRC slaps huge £1,600 fines on 600,000 struggling families who don't even owe tax Click to share on X/Twitter (Opens in new window) Click to share on Facebook (Opens in new window) HUNDREDS of thousands of low earners have been slapped with hefty HMRC fines, even though they don't owe any tax. Currently, individuals earning less than £12,570 a year do not pay income tax. Sign up for Scottish Sun newsletter Sign up 1 Those who are self-employed must complete a self-assessment tax return each year Credit: Getty Similarly, you are not liable to pay National Insurance contributions if your income or profits (for the self-employed) are below this threshold. However, those who are self-employed must complete a self-assessment tax return each year, even if they don't reach these earning thresholds. Failure to file this before the paper deadline on October 31 or the online deadline on January 31 results in an automatic fine. New data from a Freedom of Information request by think tank Tax Policy Associates (TPA) shows that over 600,000 people earning below the tax threshold were fined £100 by HMRC between 2018 and 2023. These fines start at £100 but can quickly spiral into thousands. If the fine isn't paid, penalties keep increasing, reaching over £1,600 within months. For those who miss deadlines year after year, the fines pile up, along with interest. One taxpayer, interviewed by TPA, was hit with over £10,000 in penalties, despite not owing a single penny in tax. The rules were changed in 2011, so penalties now stick even if no tax is due. At the time, campaigners warned this would create hardship for vulnerable people, but their concerns were ignored. Easy Income Boosters Money Making Tips You Need to Know Dan Neidle, from the TPA, said he had heard from "hundreds" of people affected, many struggling with serious physical and mental health issues. He said: "The Government should act, and stop the most vulnerable in society having their lives made harder by HMRC." The Government has promised to reform the system, capping penalties at £200 and removing the automatic £100 fine. However, these changes will only apply to high earners under the Making Tax Digital scheme, starting in 2026 for those earning over £50,000. There is still no timeline for low-income earners, leaving them stuck with harsher penalties under the current rules. The Low Income Tax Reform Group (LITRG) said this will create a "two-tier" system. Antonia Stokes, of the group, said: "LITRG would like to see HMRC speed up its roll-out, so that all taxpayers can benefit from the new penalty regime." Do I need to file a tax return? Self assessment is the system HMRC uses to collect income tax for some workers. For most employees, tax is automatically taken out of their wages, pensions, or savings through PAYE. But if you've got other types of income or are self-employed, you'll need to report it by filing a tax return. You'll need to send in a self assessment tax return if any of the following apply: You made over £1,000 from self-employment. You earned more than £2,500 from renting out property. You or your partner got High Income Child Benefit, and one of you had an annual income of over £50,000. You received more than £2,500 in untaxed income, like tips or commission. You're a director of a limited company. You're a shareholder. You're an employee claiming expenses over £2,500. You have an annual income of more than £100,000. How do I submit a tax return? Before you can complete and submit your tax return, you must have a so-called unique taxpayer reference (UTR) and activation code from HMRC. This can take a while to receive, so if it's the first time you're completing a self-assessment, register online immediately and ask HMRC for advice. To sign in or register, visit If you've already signed up for self-assessment, you can find your UTR in relevant letters and emails from HMRC. HMRC accepts your payment on the date you make it, not when it reaches its account - including on weekends. The deadline for filing your self-assessment tax return by post is October 31. If you miss the deadline by up to three months, you will be charged a £100 penalty. If you miss the deadline by over three months, you will be charged more. But don't worry. You can complete your tax return online if you don't send your paper form on time. The deadline for this was January 31, 2024. If you need to change your tax return after filing it, you can do so within 12 months of the original deadline. Filling in your tax return can seem daunting, but with our step-by-step guide, you'll have it sorted quickly.
Telegraph
6 days ago
- Business
- Telegraph
HMRC issues 600,000 fines – to people who owe no tax
HM Revenue and Customs (HMRC) has charged 600,000 late penalties to low earners despite them owing no tax. The tax office applies an automatic £100 fine if someone misses the tax return deadline of January 31, with penalties increasing over time and escalating to more than £1,600. Workers who earn more than £1,000 in self-employment income are required to file an annual tax return, which means even those below the £12,570 tax-free allowance could be hit with a penalty for late filing. Between 2018 and 2023, 600,000 penalties were charged to taxpayers with no income tax liability, according to figures obtained by Tax Policy Associates via a Freedom of Information request. This includes multiple penalties received by the same individual. Dan Neidle, of the think tank, said he had heard from 'hundreds' of those affected, many of whom had serious physical and mental health difficulties. He said: 'The Government should act, and stop the most vulnerable in society having their lives made harder by HMRC.' The Freedom of Information request revealed that those who owed no tax were more likely to face a late penalty than any other group based on income decile. Some may have been fined by mistake after earning less than the £1,000 trading allowance. Anyone who believes they have been incorrectly fined for filing late can appeal directly to HMRC within 30 days of the penalty notice being issued. HMRC said it had cancelled around one third of late submission penalties over the past three years. The previous Conservative government introduced a new penalty regime, which it described as 'simpler and fairer'. Under the points-based system, there will no longer be an immediate £100 fine if the deadline is missed, and penalties will be capped at £200 per tax return. However, only taxpayers joining Making Tax Digital will be subject to the new regime. Those earning over £50,000 in self-employment income will be brought into HMRC's digital drive from April 2026, dropping to £20,000 by 2028. Taxpayers outside of Making Tax Digital will continue to be assessed under the old regime. The Low Income Tax Reform Group (LITRG) has warned this creates a 'two-tier' system, where low earners pay thousands of pounds more for filing late. Antonia Stokes, of the group, said: 'LITRG would like to see HMRC speed up its roll-out, so that all taxpayers can benefit from the new penalty regime. 'If this is not possible, there are a series of tweaks HMRC could make to the existing regime that will bring it closer to its replacement, and mitigate some of these harshest effects.' These tweaks include greater leniency towards those who have missed the deadline just once, and easier exit from self-assessment for those who no longer need to file a tax return. A spokesman for HMRC said: 'Our aim is to help people to get their tax right and avoid fines altogether, and 11.5 million customers filed their 2023-24 tax return on time. If you no longer need to file a tax return, including because your earnings are lower, check using our online tool and then tell us to avoid a penalty. 'Those who believe they've incorrectly received a penalty for filing late can appeal. We can cancel penalties when a reasonable excuse is provided.'
The Independent
23-06-2025
- Business
- The Independent
What Farage's ‘Robin Hood tax' could really cost the UK
Reform UK is proposing a "Britannia card" scheme, replacing the non-dom status, allowing wealthy individuals to pay a one-off £250,000 fee. Nigel Farage and Reform UK believe this scheme would attract wealthy individuals back to the UK, generating £2.5 billion annually to fund a £1,000 dividend for low-income earners. Tax expert Dan Neidle of Tax Policy Associates warns the Britannia card could cost the economy £34 billion over five years. Mr Neidle argues the scheme would discourage highly skilled professionals, face limited take-up from the very wealthy, and provide a significant tax windfall to existing wealthy individuals. Reform UK maintains the scheme is already attracting interest and is necessary to reverse the flow of wealthy individuals and company directors leaving the UK due to current tax regimes. Farage's 'Robin Hood tax' would cost UK £34bn a year, warns tax expert
