Tim Baum-Dixon: Wealth taxes are the easy option that never works

Tim Baum-Dixon is a Chartered Accountant, Director at Botham Accounting, and Conservative councillor for Anston and Woodsetts in Rotherham.

There is a £51 billion black hole in the public finances, and Rachel Reeves is looking for someone to pay. The temptation is obvious: turn again to wealth taxes.

They are the easy political option. Most voters believe they will never be affected — someone richer, somewhere else, will pick up the bill. But wealth taxes, whether imposed openly or by stealth, do not work. They shrink the economy, punish success, and erode the growth on which public services depend.

The politics is straightforward. They poll well because people assume they will not be touched. But in practice it is not billionaires with yachts who pay. It is the family that has spent decades building a business, the farmer whose land is valuable on paper but produces modest income, and the pensioner with a paid-off home and savings carefully built up over years.

These are the people who employ others, invest in their communities, and drive growth. Treat them as nothing more than a source of tax revenue, and they eventually scale back, sell up, or move elsewhere.

Britain already has wealth taxes in all but name.

The capital gains tax allowance has been cut from £12,300 to £3,000 over the past two years. The dividend allowance has collapsed from £5,000 in 2016 to just £500 today. Thresholds for income tax and inheritance tax have been frozen, pulling more people into higher rates year by year. These changes were introduced under Conservative governments, and Labour has chosen not to reverse them but to go further.

VAT on private school fees is being imposed, with the Institute for Fiscal Studies warning it could end up costing the Treasury hundreds of millions as children shift into the state sector. The non-dom regime has been abolished, and Oxford Economics projects that between seven and 32 per cent of those affected will leave the UK, taking billions in tax revenue with them.

These are not always labelled as wealth taxes. But the effect is the same: they reduce savings, erode capital, and discourage long-term wealth creation.

Other countries show where this road leads. France abolished its wealth tax in 2017 after years of capital flight. Norway raised its wealth tax and watched more than fifty millionaires leave in a single year. Germany and Austria scrapped theirs when the revenues raised failed to cover the damage caused.

The pattern is clear. Wealth taxes drive away the very people who generate growth.

We are beginning to see the same here. HMRC’s own data shows capital gains tax receipts fell by £1 billion in 2024–25 as investors cashed out early or left before changes hit. Charitable giving and reinvestment are reported to be falling.

Even more concerning is the effect on ambition. As a chartered accountant working with small and medium-sized businesses in South Yorkshire, I see entrepreneurs asking whether it is worth the effort. If building a business only leads to punitive taxes, entrepreneurs and business owners will simply decide not to bother — or to take their talent overseas.

This is the long-term cost, of not just today’s money leaving but of tomorrow’s wealth never being created in the first place.

We need stable and predictable tax policy, rules that do not penalise normal business activity, protection for family firms and savers, and a competitive system that encourages philanthropy and reinvestment rather than discouraging it.

A growing economy delivers revenue that is both larger and sustainable. Raiding existing wealth only undermines it.

Wealth taxes are the easy political option. They sound painless, because most people think they will not pay them. But history shows they do not work. They shrink the tax base, deter investment, and choke off ambition.

Rachel Reeves may believe they can fill her £51 billion black hole. They will, however, only make it deeper.

There is now a clear opportunity for Conservatives to capitalise on.

The party can retake its place as the party of aspiration — backing wealth creators, and inspiring the next generation to build businesses, create jobs, and invest in Britain’s future. We need to clearly reject the politics of envy and put forward a positive vision for the future.  A country where aspiration is rewarded, not punished and success is something to aspire to, something that should be celebrated and not attacked.