There can possibly be an amount of around £174 billion if the government of the UK tends to get the rich people taxed at the same rate as it charges tax on the income. For the discussion, we must first develop an understanding of what is rich people tax or wealth tax and whether it is being implemented anywhere in the UK. We can take the example of a billionaire here, whose net worth is around £3.24 billion.
Let’s understand that the net worth is not just a sum to his salary but an addition to all the assets, wealth, and businesses. This becomes a little complicated to initiate the process of wealth tax over such cases of wealth. Further in the discussion of this article, we will focus on the frequently asked questions related to what is wealth exactly, what is the procedure to calculate your wealth, what is the issue to enforce wealth tax, and what is rich people tax in the UK.
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How Do You Define Wealth?
As per the definition of Investopedia, “Wealth measures the value of all the assets of worth owned by a person, community, company, or country.” However, when it comes to the wealth of an individual it is not just his income that is considered in the sum of wealth but also the assets that he owns that are taken into account for the total wealth. Possibly your house, your cars, your business assets, your paintings, your bonds, your furniture, the value of shares if you have any, and your property are all the assets that are added to make the sum of your wealth.
What is the Procedure to Calculate Your Wealth?
As discussed earlier, it is not just the plain amount of your salary when it comes to the calculation of your wealth. Everything that you own as your assets is being considered. The value of your house, cars, shares, and other properties can be added along with the number of your earnings. However, once your money and assets are all put together to make a final calculation, your loans, credit cards, and the debts like mortgages must be removed from your net worth before figuring out the final number net worth.
Because of these factors, it gets complicated to introduce the wealth tax and implement it fairly with accurate charges. Sometimes people are rich in assets but poor in cash. This is the reason that makes you disproportionately more wealthy and your income is low to be called a wealthy income. In such a case the overall net worth will be considered and paying that much of an amount as the tax will be a serious financial hit. People in such situations will not be able to handle the tax implications and manage such big amounts for tax charges.
The Issue of Enforcing Wealth Tax
According to recent research, there are only four countries in Europe that are under control and are able to implement the wealth tax. Belgium, Spain, Norway, and Switzerland come under this list of wealth tax. A few years back in the 1990s there were several countries that used to practice wealth tax charges on rich people, however, this practice was gradually decreased because of the way wealth tax was being enforced on people.
The major problem related to this wealth tax enforcement issue that came into the limelight was the prevention of rich people to move their assets and money to other countries. The counterproductive practice of moving money to such countries that do not have a wealth tax could be an easier possibility for people.
What is Rich People Tax in the UK?
According to analysis between the period of 2011-2018, the reports of the Guardians say that the income was being taxed at the rate of 29.4%, however, the wealth was being taxed just at the rate of 3.4%. In such a case there are high chances for the lower income families to be affected the most. This is because the wealth is being taxed at a lower rate. This can result in a situation where the wealthier in the UK will become wealthier. However, the lower income will be the most affected.
Moreover, there is no implementation of the strict wealth tax to be proposed in the UK as yet. There can be a few suggestions to stimulate:
- The higher tax rate reliefs should be get ridden off for the pension contributions.
- Annual capital gains tax allowance should be reduced.
- There should be equal tax charged on capital gains and on income.
- There should be a capital gain tax on the houses of people who are demised.
- A one-off NHS surcharge should be used to charge tax on a little percentage of the rich people’s wealth.
The Bottom Line
Now that you have gathered a fair amount of information about what is the rich people tax, we can bring the discussion towards wrapping up. As discussed above that the practice of wealth tax is being implemented in four European countries only, The reason behind not being able to enforce wealth tax in other countries is the way it was considered to be charged. If the suggestions of experts are taken into account and considered to charge the wealth in an appropriate manner, there can be a lot of beneficial factors that one can enjoy from the practice of wealth tax. We hope these few minutes of reading will help you to develop a better understanding.
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Disclaimer: The information about the rich people tax provided in this blog includes text and graphics in general. This does not intend to disregard any of the professional advice.