Wealth tax could ease UK budget gap — or send millionaires packing

MANCHESTER, England (CN) — The U.K. government is searching both ends of the economic spectrum for ways to fill a gaping $6.7 billion budget hole, after fights over welfare cuts left the governing Labour Party bruised this month.

Asked in the House of Commons whether he would rule out a tax on the wealthiest, Prime Minister Keir Starmer sidestepped questions, saying, “We can’t just tax our way to growth.”

Conservative leader Kemi Badenoch said that the prime minister was “flirting” with the idea, after former Labour leader Neil Kinnock called for a 2% tax on wealth over £10 million ($13.5 million).

A wealth tax is an annual levy on the total net wealth of an individual, household, or business, rather than income. It typically includes the total market value of assets, including savings, investments and property.

There are 3 million millionaires in the U.K., with approximately 20,000 people with assets over $13.5 million, representing 0.04% of the population. The Tax Justice Network claims that a wealth tax could raise $32 billion a year.

This figure may be optimistic.

Arun Advani, director of the Centre for the Analysis of Taxation and a professor at the University of Warwick, said a 1% levy would raise closer to $16 billion after accounting for changes in behavior.

If the rate were doubled to 2%, it wouldn’t necessarily double the revenue, according to Advani’s work, as more wealthy individuals would look for ways to avoid it.

Since coming into power, the Labour government has imposed fiscal rules in a bid to rebuild market confidence and boost economic growth.

Promising not to raise taxes on “working people,” the government has cut public spending on welfare and international aid, while increasing certain taxes such as capital gains, payroll taxes paid by employers, and removing tax relief for private schools and non-domiciled residents.

However, the economy is stalling, with GDP falling 0.1% in May 2025, following a drop of 0.3% in April 2025. In a further blow to the government, its key welfare reform bill passed only after a number of concessions forced by Labour rebels, leaving a $6.7 billion hole in the public finances.

Now the question turns to how that hole can be filled.

Public support

Support for a wealth tax is high across party lines, according to a recent YouGov poll. Three in four Britons back the proposal put forward by Kinnock, including 88% of Labour voters, 62% of Conservatives, and 55% of those who support Reform UK, an upstart right-wing party.

Despite the Labour government’s hesitancy to consider it, voters like Phil are adamant. He said: “If you can make a difficult decision to take from pensioners, the sick and disabled, can you also make a difficult decision to tax the wealthy and corporations?”

Helen, a fellow voter, said: “We must tax the very wealthy. They are so rich that a bit more taxation wouldn’t really affect them,” adding that the revenue is needed to improve public services.

A millionaire exodus?

Critics of a wealth tax point to the risk of capital flight and doubts over how much revenue such a policy would raise.

According to the latest Henley Private Wealth Migration Report, an estimated 16,500 millionaires are expected to leave the U.K. in the next 12 months, the highest projected outflow of wealthy individuals from any country this year.

“2025 marks a pivotal moment,” said Juerg Steffen, chief executive of Henley & Partners, an investment migration consultancy. “For the first time in a decade of tracking, a European country leads the world in millionaire outflows. This isn’t just about changes to the tax regime. It reflects a deepening perception among the wealthy that greater opportunity, freedom and stability lie elsewhere.”

Some economists have also raised concerns about the effectiveness of a wealth tax. The Institute for Fiscal Studies said a better approach would be to target the way wealth is accumulated and spent.

“It is difficult to make the case that an annual tax on wealth would be a sensible part of the tax system even in principle,” said Stuart Adam, a senior economist at the institute. “Taxing the same wealth every year would penalize saving and investment.”

Adam added, “There are strong reasons to radically reform how we currently tax the sources and uses of wealth,” such as capital income taxes. “An annual wealth tax would be a poor substitute for doing that.”

Arun Advani said a wealth tax is feasible but would take time to implement and wouldn’t be an easy fix.

“It is possible to build a functioning wealth tax, but not quickly, so it wouldn’t solve a government’s need for revenue soon,” he said. “In the U.K. currently we already tax wealth in various ways, including taxes on capital gains — those taxes work poorly.”

If the government wants to raise more money from wealth, “they would be better to fix issues with the current taxes first,” he said.

Voice of millionaires

The Tax Justice Network carried out its own research and refutes previous findings of Henley & Partners, which it describes as “a firm that sells golden passports to the superrich," it said in a news release.

Between 2013 and 2024, The Tax Justice Network estimated that “the millionaire migration rates consistently stood at near 0% for every year.” For the U.K., 9,500 millionaires left in 2024, representing 0.3% of the country’s millionaires.

The advocacy group Patriotic Millionaires found that 80% of British millionaires support a 2% tax on wealth over $13.5 million. The survey of over 500 millionaires also found that 76% support higher taxes on their own wealth if it resulted in a more equal society for future generations.

Stephen Kinsella, a member of Patriotic Millionaires, said, “Our country needs investment, not more cuts. As patriotic millionaires we would be proud to pay more and, as our polling shows, the vast majority of U.K. millionaires agree with us.”

He added that, “There’s plenty of wealth in the U.K., it’s just stuck in the hands of a few people,  like the 40 families who now own as much wealth as half of the population.”

Wealth taxes in other countries

Wealth taxes are already in place or under debate across several European countries.

In France, a group of seven Nobel Prize-winning economists, including Paul Krugman and Joseph Stiglitz, has urged the government to introduce a minimum tax on the wealthiest households.

The measure was rejected by the Senate last month but is now back on the table as the French government searches for ways to shore up public finances.

Norway and Spain currently apply modest annual wealth taxes, though both exclude significant portions of personal assets. Italy has also imposed targeted levies on financial assets held abroad.

Some countries have used one-off wealth taxes during national emergencies. In Argentina, the government introduced a “solidarity tax” in 2021 on those with more than $200 million pesos to help fund Covid-19 recovery efforts.

Advani was part of The Wealth Tax Commission that looked at how the design and administration of wealth taxes worked elsewhere. “We didn’t find any shining example of success,” said Advani, “but didn’t find a consistent theme in explaining failure. Most countries excluded some assets, and all took shortcuts” when it came to valuing assets.

“These problems ultimately undermine most wealth taxes, and that is why we insisted that if a new wealth tax were to be developed, a core principle would have to be valuing all assets at their market value,” Advani said.

While a wealth tax has broad public backing, any legislation in Parliament is a long way away.

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