Whispers of a new ‘wealth tax’ have been doing the rounds lately, and while nothing has been formally announced, it’s getting harder to ignore the growing pressure on the government to consider it.

With Chancellor Rachel Reeves operating in a tight financial box, and little political appetite for raising income tax or VAT, some campaigners and think tanks see wealth as the next logical target.

But what is a wealth tax, how might it work, and – most importantly – do you actually need to worry about it?

Let’s break it down without the scare tactics or speculation.

What Actually Is a Wealth Tax?

In simple terms, a wealth tax targets assets, not earnings or spending.

We already have a few of these in the UK, though they’re not usually described as “wealth taxes”:

• Capital Gains Tax (CGT) – paid when you sell an asset that’s grown in value 
• Inheritance Tax (IHT) – paid on your estate when you die (above the thresholds) 
• Stamp Duty Land Tax (SDLT) – paid when buying property 

What all of these have in common is that they’re event-driven. You don’t pay them every year – only when something specific happens, like a sale or a death.

A proper “wealth tax” (as campaigners are proposing) would work differently.

What Are Labour Being Asked to Consider?

The big idea being floated is an annual tax on extreme wealth. Groups like Tax Justice UK are lobbying for:

• A 2% yearly charge 
• On net assets over £10 million 
• Affecting fewer than 20,000 people in the UK 

According to supporters, this could raise around £24 billion a year, even if some high-net-worth individuals chose to leave the country.

But, as always, it’s not that simple.

What the Critics Say

Fiscal heavyweights like the Institute for Fiscal Studies (IFS) have been quick to pour cold water on the idea.

Here’s the short version of their concerns:

• Hard to implement: It’s difficult to accurately value complex assets like private businesses or art every year. 
• Penalises saving and investment: Taxing the same pot every year could discourage people from building wealth in the first place. 
• Difficult to avoid loopholes: Unless it applies to all forms of wealth, people will find ways to shift assets into exempt areas. 
• May not raise much: If enough people move abroad or rearrange their assets, the predicted revenue could shrink fast. 
• International experience isn’t great: Most countries that tried an annual wealth tax have since scrapped it, often because it was more hassle than it was worth. 

In short: the idea sounds neat, but the real-world problems are enormous.

Even the IFS – who are no defenders of tax loopholes – suggest there are better ways to tax wealth more effectively. Reforming CGT or pension tax relief, for example, might achieve more without needing to build a whole new tax system.

Should You Be Doing Anything Now?

Right now? No. Here’s why:

• There’s no formal policy. Labour hasn’t committed to anything, and even if they were tempted, the political risks are enormous. 
• The thresholds are high. Even if it were introduced exactly as proposed, it would affect a tiny slice of the population – those with net assets above £10 million. 
• Making big changes to your finances based on a rumour is rarely a good idea. 

That said, long-term tax planning is always wise, regardless of what party is in power or what may (or may not) be around the corner.

What You Can Do

If the idea of future tax changes gives you pause – whether it’s about wealth tax, IHT reform, or higher CGT – there are still sensible steps you can take.

✅ Get your estate plan in order: Gifting strategies, trusts, and pension planning can all help manage IHT exposure.
✅ Review your investment structure: Using ISAs, pensions, and other tax-wrappers can protect your wealth from unnecessary tax now and in the future.
✅ Stay diversified: If tax policy does change, being spread across different asset classes and structures gives you more flexibility.
✅ Speak to a financial planner: If you’re in or approaching the wealth bracket that might be affected, it’s worth checking your exposure and getting expert advice.

Final Word

A wealth tax may never happen – and if it does, it will likely look very different from what campaigners are calling for today. But what it does highlight is how much focus there now is on taxing wealth more effectively.

If you’ve worked hard to build up your savings, it makes sense to think about how tax policy could affect you down the line. But panic isn’t the answer – good planning is.

So don’t make rash moves based on headlines. But do make sure your financial plan is robust, flexible, and designed with the long term in mind.

Because even if this wealth tax never lands, the goal remains the same: keep more of what you’ve built, and pass it on with confidence.