The tax is cast

Why there will be no big tax decisions from Burnham and co…

Introduction

Will Andy Burnham’s new government introduce an annual wealth tax? A nationwide land value tax? A freestanding exit tax?

No. No. And, in the third case, almost certainly not on its own.

I like a land value tax, provided it replaces other property taxes. There is a respectable case for taxing wealth more and labour less. An exit tax can protect the UK’s claim over gains accruing during residence. But each reform demands machinery, creates visible losers and produces uncertain receipts.

Burnham supports a land value tax while committing himself to fiscal rules, Labour’s 2024 manifesto and avoiding risks to the public finances[1]. Those positions operate on different timetables. A reform for the next twenty years will not necessarily fill the hole at the next fiscal event.

Instead, expect greater pressure on familiar tax bases. Higher rates, frozen thresholds and fewer reliefs. The interesting question is how far the Government will go to make those changes stick. An exit tax could yet become supporting artillery for a substantial CGT reform (which I don’t think will happen anyway).

The old moulds

Britain still invents taxes. The Bank Levy, Apprenticeship Levy and Energy Profits Levy prove that. What it has largely stopped inventing is broad, durable national tax bases.

Creating a tax base, changing its collection system and widening its perimeter are different things. CGT brought gains into charge. PAYE made income tax easier to collect. Replacing domicile with residence changes who and what falls within existing taxes. Freezing allowances simply turns the screw.

The great reforms generally needed a forcing event. Income tax began in 1799, but the world wars turned it from a class tax into a mass tax. PAYE followed in 1944. National Insurance, introduced in 1911 and expanded after the Second World War, became economically a second mass levy on earnings. Calling it a “contribution” was an inspired piece of branding of which Burnham himself would be proud.

Corporation tax and CGT arrived in 1965. Companies had previously paid income tax and profits tax. CGT addressed an obvious gap: high income-tax rates encouraged taxpayers to convert income into capital. The distinction between income and gains would persist, but allowing the label to determine whether a return was taxed at all was untenable. VAT followed in 1973, linked to entry into the EEC: another external imperative driving reconstruction.

Later experiments offer less encouragement. Labour’s 1974 wealth-tax proposal[2] was shelved in 1976. Capital Transfer Tax, introduced in 1975, sought a broader charge on lifetime transfers and estates. Its replacement,by inheritance tax in 1986 removed the immediate charge on most lifetime gifts in favour of potentially exempt transfers. Expansion was followed by retreat. The poll tax demonstrated that administrative neatness cannot rescue politically unacceptable incidence.

Self Assessment and Real Time Information modernised collection. They did not discover substantial new categories of economic value to tax. The moulds are old. Governments keep finding ways to apply more pressure through them.

An established tax comes with returns, payment systems, case law, appeals and advisers who broadly understand it. A new one may need an asset register, valuations, reporting duties and rules to police unfamiliar boundaries.

Forecasting adds another difficulty. HMRC and the OBR do model behaviour, but estimates become less secure when receipts depend on a small, wealthy and responsive population. Taxpayers can defer disposals, borrow, reorganise ownership, use reliefs or leave. Markets respond too. Of course, none of that establishes that a new tax cannot raise money.

A threshold freeze is wonderfully undramatic. Earnings rise and more income drifts into tax or a higher band. The OBR’s March 2026 forecast[3] expects earnings growth and frozen thresholds until April 2031 to drive rising personal-tax receipts. The broad base makes the yield less sensitive to individual decisions than capital taxes.

Fiscal drag[4] has costs and depends on earnings and inflation. But it uses existing machinery and arrives quietly. There is rarely one identifiable moment when the state appears at the door carrying a shovel.

The non dom dress rehearsal

The non-dom reforms show why the distinction between future returns and existing family capital matters.

The Conservatives announced abolition of the remittance basis in March 2024, proposing a four-year foreign income and gains exemption for qualifying arrivals from April 2025. They also proposed continued IHT protection for non-UK assets settled into trust by non-domiciled settlors before April 2025.

Established non-doms might have decided to suck it up and pay more on future income and gains. Their wealth would grow more slowly, but the existing family trust fund would retain protection.

Labour kept the four-year regime but removed that broad proposed grandfathering. Under the final rules, individuals generally become long-term residents after UK residence in at least ten of the previous twenty tax years. IHT exposure can continue for three to ten years after departure. Subject to transitional provisions, their non-UK trust assets can fall within charge while they are long-term resident.

There were transitional measures. Qualifying foreign assets could be rebased to 5 April 2017. The three-year Temporary Repatriation Facility applied rates of 12 per cent in its first two years and 15 per cent in the third to designated historic foreign income and gains. But those measures did not reproduce the Conservatives’ proposed broad protection for pre-April 2025 trust property. The IHT settlement became materially less protective.

Tax on future returns slows accumulation. IHT on an existing trust fund can take a bite from what the family already regards as its own when a chargeable event occurs. That changes the conversation from “Can I tolerate paying more?” to “Can I do what I need to do here while remaining non-resident?”

Of course, tax and money are not the only reasons people choose a home[5]. But this is a tax article, capisce?

It is too early to declare the reform a success or failure. The first official HMRC statistical release following the changes is not due until 30 July 2026 and will provide limited evidence about a regime commencing in April 2025. But the behavioural distinction matters.

The wealth tax shovel

An annual wealth tax magnifies that problem. The liability arises because the taxpayer owns the asset, whether it produces cash, appreciates or delivers any return at all.

Europe has tried this. The number of OECD countries imposing individual net wealth taxes fell from twelve in 1990 to four in 2017[6]. France subsequently narrowed its tax to real estate. Norway, Spain and Switzerland are the remaining examples generally cited. Europe has largely voted with its statute book.

Repeal does not prove that every tax raised nothing or that millionaires fleeing caused every failure. The recurring problems included narrow bases, avoidance, capital flight and administrative costs disproportionate to receipts. Some taxes disappeared within wider capital-tax reforms and others raised revenue but were judged too costly or distortionary.

Norway complicates the story. Following wealth-tax increases, 261 residents with assets above NOK 10 million left in 2022 and another 254 in 2023, more than twice the previous typical rate. Yet about 12 per cent of the population paid the tax in 2023, generating approximately 0.6 per cent of GDP[7].

That is a trade-off. Norway accepts some migration and possible economic cost in return for redistribution and receipts. Supporters can point to money collected and critics can point to founders, investors and a future tax base departing stage left.

In April 2026, finance minister and former prime minister Jens Stoltenberg acknowledged that capital taxation could encourage departures. Preventing every departure would require tax levels his government did not consider desirable. However, this was more of an acknowledgement, than a surrender[8].

Norway’s tax is longstanding and broadly embedded. Oil wealth and its sovereign wealth fund also change the fiscal bargain. A narrow British levy aimed at a few thousand people would depend much more heavily on individual responses. Not everyone has to leave for the forecast to be wrong. Norway also strengthened its exit-tax rules: one tax creating demand for another to protect it.

Switzerland shows that wealth taxation can work. OECD figures[9] for 2016 put receipts at about 1 per cent of GDP. But its cantonal and communal taxes form part of a longstanding, decentralised settlement, with wealth reported alongside income and debts generally deductible.

Again, the surrounding bargain matters. Cantons compete over rates, allowances and deductions, giving taxpayers a closer connection between the jurisdiction, total burden and services provided. Switzerland also treats private movable capital gains more benignly than the UK. One cannot lift the wealth-tax line from a Swiss return and paste it on top of British income tax, NICs, CGT, IHT, Council Tax and stamp duty.

“Tax wealth rather than work” too often means “tax wealth as well as work”.

Without corresponding reductions elsewhere, the proposal adds to the burden. It does not transfer it. That may be defended as redistributive policy, but it should be sold honestly. A charge accepted within a system taxing capital more lightly elsewhere is a different proposition from another layer on the present British settlement.

Then come valuation and liquidity. A quoted share has a price. A private company may depend on forecasts, shareholder restrictions and the availability of buyers. Two competent valuers can (and usually do!) disagree without either acting improperly. Minority discounts, key-person risk and intellectual property complicate the exercise. Trusts, partnerships, art, family loans and deductible debts create further boundaries. Repeat those valuations annually, allow HMRC to challenge them years later, and the compliance burden becomes substantial.

A wealthy founder may have little cash. Paying the tax may require a dividend, borrowing or a sale. Deferral delays receipts; interest enlarges the eventual bill; exemptions invite wealth into favoured assets. The base begins to resemble the European taxes gradually hollowed out by reliefs.

A tax on unrealised gains can demand cash in year one before the paper profit disappears in year two. Carrying the subsequent loss forward may recognise the reversal eventually. It does not return the cash when the taxpayer needed it. An annual wealth tax is blunter still as it does not require even a paper gain. Continuing ownership will suffice.

Land value tax needs time

Land is different. It cannot move abroad. An owner can sell, but the land remains and the next owner inherits the liability. Future tax tends instead to be reflected in the price.

Taxing unimproved land value should distort activity less than taxing buildings, improvements or transactions. Improving a property need not increase the bill; moving need not trigger a large transaction tax.

I like it as a replacement for some combination of SDLT, Council Tax and business rates. SDLT penalises moving and reallocating property. Council Tax in England still uses values at 1 April 1991. That is an archaeological site.

Replacement nevertheless requires consistent valuations separating land from improvements, appeals, liability rules and provision for owners with valuable land but little income. Britain has valuation and property-record infrastructure, but a national reform would still take time.

The transition also reallocates the burden from transactions, occupations and businesses towards landowners. Even where the total revenue is unchanged, the identity of those paying it may change considerably. That creates immediate political pain. Larger future bills can reduce present property prices. Someone who recently bought at a price reflecting low recurring taxation may reasonably object.

Deferral protects cash-poor owners but postpones collection until sale or death. Phasing delays revenue and leaves two systems running alongside each other; compensation consumes it. None of these difficulties makes LVT technically impossible. They explain why an attractive long-term reform can remain an unattractive answer to an immediate funding problem.

A proper LVT could improve the system over a generation. It is poorly suited to filling next year’s fiscal hole. Burnham’s support tells us the destination, not how quickly he can get there.

George Osborne’s property reforms show the easier route. Higher SDLT on certain corporate purchases, ATED, non-resident residential gains, restrictions on landlords’ finance-cost relief and the additional-property surcharge increased pressure on identifiable taxpayers through familiar systems.

His 2014 move from SDLT slabs to slices also reduced tax for most purchasers while increasing it at the top. General CGT rates were subsequently cut from 18 and 28 per cent to 10 and 20 per cent while the higher residential-property rates remained. Property was deliberately singled out.

It was a strategic shift. But Council Tax remained unrevalued, SDLT survived and no LVT arrived. ATED was new, but deliberately narrow.

Osborne installed a property-tax ratchet. A new settlement would have been a much larger undertaking.

CGT is the obvious target

During the Labour leadership contest, Wes Streeting proposed[10] a “wealth tax that works”: moving CGT towards income-tax rates of 20, 40 and 45 per cent, with allowances for entrepreneurship and investment. He suggested receipts of about £12 billion a year.

Equalisation is not a wealth tax. CGT normally charges a realised gain on disposal. It does not send an annual bill for continuing to own an asset. It also comes with legislation, returns and collection machinery already in place.

The organising principle is familiar. Nigel Lawson aligned individuals’ CGT rates with marginal income-tax rates in 1988. But his system included indexation. Applying income-tax rates to nominal gains today would not recreate that settlement. The modern CenTax proposal attempts to address this through an investment allowance.

As I discussed in This Tax Ain’t Big Enough for the Both of Us, “a pound is a pound” becomes less convincing when it represents thirty years’ growth, includes inflation and is pushed into the highest band by being realised in one tax year. A founder’s business and an investment property also invite different political treatment.

Each objection tends to generate a relief, allowance or exception. That, ladies and gentlemen, is how tax legislation acquires its thousands of pages.

Higher rates can reach appreciation already embedded in assets unless rebasing is provided. Even so, the charge normally waits for disposal. That makes CGT less immediately invasive than an annual wealth tax, and much easier for a government to present as familiar territory.

The rate is not the revenue

There is one awkward detail. HMRC’s June 2025 ready reckoner estimated that a ten-percentage-point increase in the higher CGT rate would reduce receipts by £540 million in 2026-27, £2.06 billion in 2027-28 and £3.565 billion in 2028-29. Even a five-point rise was shown as reducing receipts by £170 million, £235 million and £870 million respectively. HMRC warned that the effects are nonlinear and large increases can reduce yield because taxpayers respond[11].

How does that square with claims of £12 billion or £14 billion from equalisation?

They are estimates of different policies.

HMRC considers rate increases with the surrounding system broadly intact. Taxpayers can bring disposals forward, postpone them, borrow against assets or use reliefs. Fewer property transactions may also reduce SDLT.

Economists call this lock-in. Tax practitioners call it not selling the thing.

Borrowing against an appreciating asset can provide spending power without a disposal, as I explored in (Taxing) the Bird in the Hand… and the Two in the Bush? The owner may then retain it until death. Death normally triggers no CGT, and market-value acquisition by the recipient can erase the lifetime gain, although IHT may apply separately.

Higher CGT rates strengthen that incentive. Migration offers another response, subject to temporary non-residence and other rules.

CenTax’s estimated £14 billion concerns a package combining rate equalisation, an investment allowance, removal of the death uplift, arrival rebasing and deemed disposal on departure, plus more generous loss relief. It is an estimate of additional total tax revenue after behavioural responses. It is not the mechanical yield from raising one rate. Nor does HMRC’s published ready reckoner tell us how much of its behavioural adjustment comes from each route, or what happens when death, migration and investment reliefs are changed together.

The package closes several routes responsible for HMRC’s behavioural adjustment. That explains the different estimates. It does not make £14 billion certain. Removing one route may divert taxpayers into another. An exit charge may discourage departures after commencement while accelerating them beforehand. Removing the death uplift may encourage lifetime disposals, gifts or trust planning, and create pressure for corresponding IHT relief. An investment allowance raises its own questions about inflation, qualifying returns, debt and losses.

Revenue depends on the treatment of inflation, losses, death, arrival, departure and business disposals, as well as protection for accrued gains. Until those choices are made, “What would equalisation raise?” is not even a complete question, let alone one that can be adequately answered.

An exit tax for another tax

In Exit Tax (for a Country), I dismissed a standalone departure charge as a panic measure sending a horrible message. I remain doubtful about an exit tax introduced simply because the Government dislikes wealthy people leaving.

But raise CGT to 40 or 45 per cent and remove the death uplift, and departure becomes central to the costing.

The exit tax becomes supporting artillery. In technical tax terminology, it double-bags the main provision. The higher rate increases the liability; the departure charge tries to prevent a change of residence defeating it.

Its purpose would be to protect the main reform’s forecast yield. That is consistent with the European Commission study discussed in The Wealth (Tax) of Nations, which treated exit taxes as supporting provisions within capital-gains systems rather than major standalone revenue sources.

To  carry on the analogy, the UK already has lighter artillery of its own. Broadly, temporary non-residence rules can apply where someone had sole UK residence for at least four of the seven tax years before departure, spends no more than five years non-UK or non-sole-UK resident, then returns. Certain gains realised while away are charged in the year of return. Assets genuinely acquired during the absence are generally excluded, subject to replacement-asset and other rules.

The precise test is more complicated than “five complete tax years”. Split years and the statutory residence test matter. But the policy is oddly bullish. “Britain is ace. You will be back. Just you wait and see.”

Those resident here for only a short period before departure may fall outside the rule. For others, return too soon and the gain rises like Lazarus and bites you on the bottom. Stay away long enough and the temporary non-residence charge can be escaped, subject to separate rules for UK land and some other UK interests.

A full exit tax assumes the taxpayer may never return. It deems assets disposed of at market value immediately before departure, potentially with payment deferred until sale. It secures the claim before the taxpayer leaves. The temporary non-residence rule says, “You’ll be back.” The exit tax says, “We know you won’t… so pls swipe your credit card on the way out.”

The arrivals problem

There is a principled version. Rebase assets on arrival and tax only the gain accruing during UK residence on departure. That is less like a mugging and more like checking the meter when the passenger gets out of the taxi. CenTax combines the two.

The symmetry is essential. Taxing embedded gains on departure without arrival rebasing risks charging appreciation accumulated before UK residence.

Private businesses would still need valuations. Unsold assets create liquidity problems. Deferral raises questions about security, interest and enforcement abroad. Post-departure losses, treaties and overlapping foreign taxes require answers. The UK already has departure charges for companies and trusts, so none of this is unimaginable. It is nevertheless considerably more than changing the CGT rate.

Nor does sounder design remove the arrivals problem. An entrepreneur considering Britain will ask what claim the UK acquires over a worldwide business if they later leave.

Rebasing helps, but a founder whose company grows substantially during residence may still face a large deemed gain without a buyer or cash. Deferral eases immediate payment while allowing the UK’s claim to follow them abroad. Without it, the liquidity problem may become the policy.

A rule intended to stop people using the departure gates may make others hesitate at arrivals. Calling it anti-avoidance does not remove that trade-off.

The Ghost of Liz Truss

Perhaps the last Budget to promise anything approaching a radical change of tax direction was the Truss-Kwarteng mini-Budget[12] of September 2022. It was unashamedly pro-growth: lower taxes, stronger incentives and supply-side reform. The corporation-tax rise would be cancelled, the NIC increase reversed and the additional income-tax rate abolished. Even so, it was mostly working the familiar handles… albeit turning them decisively the other way.

We know how that ended.

Were the proposed reforms themselves so bad, or was the combination of borrowing, timing and execution fatal? Calling the package “uncosted” is perhaps too loose. The Treasury published provisional costings. What was missing was an accompanying OBR forecast and a medium-term fiscal plan explaining how the public finances would be managed. Tax cuts costing around £45 billion a year by 2026-27 were announced but the wider fiscal plan was promised later. That was a substantial request for credit.

The bond markets had their say. Rising gilt yields exposed vulnerabilities in pension funds’ liability-driven investment strategies, forced selling amplified the turmoil and the Bank of England intervened. Much of the tax programme was then reversed.

The original package’s longer-term growth effects were never tested. Could it have worked? We’ll never know. Part of me thinks it would have been interesting to find out.

The sensible lesson is that radical reform needs credible financing and independent scrutiny. However, I suspect the political lesson is much cruder. Do not try this again.

Who will volunteer to be the next Truss? Even a carefully prepared reform can now be attacked simply by invoking her name. I suspect that will inhibit anything remotely comparable for a generation. Better another threshold freeze than another emergency press conference

What remains molten?

Burnham needs revenue within the forecast period, from taxpayers HMRC can identify and systems it can operate. A new wealth tax requires uncertain valuations and behavioural assumptions. LVT requires a politically painful transition. A standalone exit tax offers uncertain receipts and a poor advertisement for Britain.

CGT begins with familiar machinery. But substantial equalisation may require the death uplift to go, better loss relief, an investment allowance and rules for both arrival and departure. A modest rate increase may be left to work through the existing system. Full alignment at 40 or 45 per cent, accompanied by a promise of £12 billion or £14 billion, is much harder to sustain without addressing departure. The more ambitious the reform, the harder it becomes to dismiss an exit charge.

I still expect the Government to squeeze an old tax base, narrow its reliefs, freeze the thresholds and reinforce its boundaries. There may be plenty of legislation and gnashing of teeth. The underlying mould will remain familiar.

The tax is cast.

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[1] https://www.reuters.com/world/uk/what-is-new-labour-leader-andy-burnhams-policy-approach-britain-2026-07-17/

[2] https://ifs.org.uk/journals/taxes-wealth-time-another-look

[3] https://obr.uk/efo/economic-and-fiscal-outlook-march-2026/

[4] https://breakingtax.com/the-tax-rises-that-didnt-bark-stealth-taxes-and-fiscal-drag/

[5] https://breakingtax.com/youre-always-talkin-about-the-boys-in-the-better-land/

[6] https://www.oecd.org/en/publications/the-role-and-design-of-net-wealth-taxes-in-the-oecd_9789264290303-en/full-report/component-4.html

[7] https://www.reuters.com/business/norways-wealth-tax-trades-millionaires-equality-2025-11-24/

[8] https://www.stortinget.no/en/In-English/

[9] https://www.oecd.org/en/publications/the-role-and-design-of-net-wealth-taxes-in-the-oecd_9789264290303-en/full-report/component-4.html

[10] https://www.reuters.com/world/uk/uks-streeting-pledges-wealth-tax-that-works-labour-leadership-bid-bbc-reports-2026-05-21/?utm_source=chatgpt.com

[11] https://www.gov.uk/government/statistics/direct-effects-of-illustrative-tax-changes/direct-effects-of-illustrative-tax-changes-bulletin-january-2025

[12] https://www.gov.uk/government/publications/the-growth-plan-2022-documents/the-growth-plan-2022-html