Will the wealth tax never die?

I hate the idea of a wealth tax, but there is one group of UK property owners who pay almost no tax here. A wealth tax aimed just at them could help us all.

The wealth tax is back. Every time I think that Vince Cable's idea to crush the rich by making them pay an extra levy on their value of their houses (maybe from £2m up, maybe from £1m up) is dead, someone writes an editorial on it, the Today programme picks up on it, and off we go again.

I have written about this here before so I won't repeat myself too much. The main points are:

we already have a wealth tax, albeit a badly collected one (IHT);

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it would difficult and expensive to collect;

it adds yet another layer of double or even triple taxation to an already unfair and complicated system;

with fiscal drag, it will be no time at all before it is not a wealth tax, but an everyman tax - just like the 40% rate.

We all know how this stuff works, so why would we agree to a wealth tax unless another tax was scrapped at the same time?

However, there is one group on which I think a mansion tax might be worth discussing: the non-resident rich.

Look around central London at night. See any lights on in the houses of Mayfair or Chelsea? No? That's because no one lives there. All too many of the very high priced houses in the centre of our capital city belong to foreigners who spend all their time somewhere else.

That comes with a cost for us: it pushes up house prices throughout the city and it makes London a much less liveable place all round (you can't form a community in London with neighbours who live in Athens and Dubai).

But it comes at very little cost to the non-resident investors. They rarely pay stamp duty, and they pay no other taxes during their holding period other than council tax. That makes them, as an irritable friend trying to buy a house in London puts it, "effectively very cheap safety deposit boxes in a safe well regulated economy for those who make their money in less well regulated economies and who aren't in the UK often enough to make a material contribution to the domestic economy".

Put your money with a wealth manager in an effort to keep it safe and it will cost you a good 1% (plus) of the value of your assets a year. Buy a £10m house in Mayfair and your annual management fee/deposit box security fee will be the price of Westminster council tax. That's £1,376 something of a bargain if you think of it as a management fee charged by the UK state/taxpayer to the foreign investor.

Particularly interesting in this context is the fact that, while the UK doesn't much seem to fancy taxing high value property owned by non-residents, other countries have no such qualms.

If you look at the budget passed in Italy in December, you will see that it includes a levy of 0.76% of the value of property held abroad by Italians resident in Italy, minus any similar taxes already levied in the country in which the property is held.

A good slug of central London property is owned by Italians. It seems that if we won't take taxes on non-resident-owned property in our own capital city, Italy will do it instead.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.