What could a Labour wealth tax look like?

Chancellor Rachel Reeves is facing some difficult decisions ahead of the Autumn Budget, and one option that’s reportedly under consideration is the introduction of a wealth tax.

In August 2025, the BBC reported that the Labour government must increase taxes if it is to plug a £41.2 billion black hole in its budget. There’s a lot of speculation about how this will be done, from increasing VAT to cutting the ISA allowance. However, one option that’s gained a lot of attention is a wealth tax.

Rather than taxing your income, a wealth tax would be a levy on some or all of your wealth. This might include savings, investments, or property.

The introduction of a wealth tax would mark a significant shift in the UK’s approach to taxation.

While the news might be worrisome, a wealth tax hasn’t been confirmed, and it’s often wise to wait for an official announcement before you make changes to your financial plan.

This isn’t the first time that a wealth tax has been considered in the UK. The topic was raised under Rishi Sunak as a way to address the financial impact of the Covid-19 pandemic. It was also considered by Harold Wilson’s and James Callaghan’s governments in the 1970s.

A UK wealth tax could be an annual or one-off charge

So, if a wealth tax were introduced in the UK, what would it look like? There are several suggestions.

One option would be an annual charge based on the value of assets you own. This would differ from Capital Gains Tax, which is charged on the profit you make when you dispose of certain assets.

In July 2025, campaign group Tax Justice UK calculated that a 2% wealth tax on assets above £10 million could raise £24 billion a year and affect the top 0.04% of wealth owners.

Another option the chancellor may consider is a one-off wealth tax, which would be used to raise substantial revenue in one go. This type of tax could help fill the black hole in the budget, but could create fiscal challenges in the longer term.

Supporters of a wealth tax say it would reduce economic inequality while also raising much-needed revenue.

Critics of a wealth tax argue it could backfire and prove difficult to implement. Indeed, in August 2025, a Professional Adviser article noted that some experts cautioned there “would be barriers to implementation and that projections for tax take from a wealth tax could prove overly optimistic”.

Spain is just 1 of 4 OECD countries with a wealth tax

The Organisation for Economic Co-operation and Development (OECD) is made up of 38 member countries, and just four – Colombia, Norway, Spain, and Switzerland – have a wealth tax. In addition, France and Italy levy a wealth tax on some assets.

How these countries operate a wealth tax could provide some insight into how it may work in the UK.

Spain’s wealth tax dates back to 1978 and, after a pause during the financial crisis, it was brought back in 2011 at a regional level. In December 2022, Pedro Sánchez, the prime minister of Spain, introduced a “solidarity tax” on large fortunes to help with public spending after the pandemic.

According to an August 2025 article published by the Guardian, the Spanish wealth tax starts at 1.7% for net wealth above €3 million (£2.6 million). The rate rises to 3.5% for wealth above €10 million (£8.6 million).

The tax is payable on worldwide assets, and there are allowances, including exemptions for the first €700,000 (£605,000) and €300,000 (£260,300) for the main residence. In addition, combined income and wealth taxes cannot exceed 60% of income.

In 2024, the total amount raised by the wealth tax was €2 billion (£1.7 billion).

Interestingly, a predicted exodus of the rich following the wealth tax didn’t materialise in Spain, no doubt making it a useful case study for Reeves.

Working with a financial planner could ensure your finances reflect government changes

Remaining in the loop about potential government changes and what they mean for you can be time-consuming. As a financial planner, we can alert you when changes could affect your financial plan and make adjustments to manage your tax liability if necessary.

Please contact us if you have any questions.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning.