Rachel Reeves under pressure to create key new mega tax | Personal Finance | Finance
Rachel Reeves is under mounting pressure to introduce mega taxes on wealth as she struggles to plug a predicted £57 billion hole in the nation’s finances.
A new poll has revealed that almost half of Brits want the Chancellor to increase taxes on those earning more than £125,000 a year, while 29% back a rise in capital gains tax and 26% support higher corporation tax.
Calls are also intensifying for Reeves to go further by imposing an annual tax on the UK’s wealthiest individuals, with more than 30 MPs and peers writing to the Chancellor urging her to adopt a 2% levy on assets over £10 million — a move campaigners claim could raise £24 billion a year.
It comes amid warnings from the National Institute of Economic and Social Research that Reeves will be forced to either cut public spending further or raise taxes if she wants to meet Labour’s self-imposed fiscal rules by 2029.
The pressure is further amplified by the political rise of Reform UK, which has surged ahead of Labour in some polls. Analysts say Reeves will have to tread carefully, with voters increasingly hostile to broad tax hikes or more government borrowing.
BMG Research, which carried out a poll for The i Paper, found public support shifting steadily away from tax increases towards cuts in spending on public services.
However, if taxes are unavoidable, it found voters are clear on who should pay. The survey found 48% support higher income tax on those earning more than £125,000, and 37% back higher duties on alcohol and tobacco.
The least popular options were increasing VAT, council tax, or income tax on lower earners.
Reform voters, in particular, are fiercely opposed to tax hikes — especially on inheritance — and are the most likely to say they are being taxed “much too much”. Only 5% support an increase in inheritance tax, compared to 9% of all voters.
Amid the political pressures, wealth taxation is emerging as a potentially more palatable route. Advocates argue it would hit fewer people, while raising large sums.
Michaela Lamb, tax partner at Gravita, said: “It typically applies to net wealth, including property, investments and other valuables above a certain threshold, less debt. It’s usually done on an annual basis.”
While the UK currently taxes wealth indirectly — through capital gains, dividends, and inheritance — campaigners say a specific wealth tax would better target the ultra-rich. In 2020, the independent Wealth Tax Commission proposed a one-off 5% tax on wealth over £500,000, to be paid in instalments, claiming it could raise up to £260 billion.
More recently, the proposal for an annual 2% levy on assets above £10 million has gathered momentum. But experts warn it would not be easy to implement.
John Barnett, a partner at Burges Salmon told the Telegraph: “Almost every country that has introduced one has found that it has raised far less than anticipated.”
He added that the difficulties in valuing assets, administering the system, and avoiding exemptions mean the effectiveness of wealth taxes often dwindles over time.
“Almost every country around the world starts with good intentions but then succumbs to pressure to exempt pension funds; then to pressure to exempt businesses; and then to pressure to exempt people’s main homes,” Barnett said. “But as soon as you exempt those three categories, 90% of the tax-base disappears.”
Christopher Massey, a senior lecturer in politics, echoed these concerns: “An option would be to reform existing taxes on wealth including inheritance tax, capital gains tax and even council tax, to make them more progressive.”
