Every so often, the tax conversation in the UK shifts. This is usually driven by the news headlines and because of the way politicians start talking about tax. And recently, Andy Burnham\u2019s comments have done exactly that.<\/p>\n
He\u2019s been clear that day to day public services should be funded by tax revenue, but equally clear that he wants to stick to the manifesto commitment not to increase Income Tax, VAT or employee NICs.<\/p>\n
When you hear those two statements side by side, it naturally prompts a bigger question: If the main tax revenues are off limits, where does the money come from? Who carries the burden?<\/p>\n
The answer seems to be \u00a0pointing towards capital or targeting wealth:<\/p>\n
One of Burnham\u2019s most talked about suggestions is the idea of a 10% levy on everyone\u2019s assets, savings and homes to fund a National Care Service.<\/p>\n
It\u2019s being floated about in the news which makes it feel significant. It reframes IHT from a tax on transfers at death\/gifts into something much broader – a potential mechanism for funding social infrastructure.<\/p>\n
For clients with property, business assets or investment portfolios, this is a fundamental shift in how wealth might be taxed.<\/p>\n
And it comes at a time when IHT is already moving:<\/p>\n
Burnham also said he would \u201clook again\u201d at IHT reliefs for farmers. On the surface, that sounds very specific. However, whenever a politician questions APR, it inevitably raises questions about the less publicised BPR, because the two reliefs sit side by side in the IHT framework. If APR is under review, BPR is likely to be too.<\/p>\n
For business owners, BPR is often the difference between:<\/p>\n
Burnham has been an advocate of LVT – an annual charge based on the underlying value of land.<\/p>\n
If this idea ever gains traction, it will reshape the tax landscape for:<\/p>\n
This isn\u2019t just a tax change. It\u2019s a shift in how the UK views land ownership and wealth tied up in property \u2013 something which has always been favourable investment in the past.<\/p>\n
The government commissioned wealth report concluded \u00a0that \u201can annual<\/u> wealth tax is a non starter in the UK \u2026 However, a one-off wealth tax<\/u> is a very different proposition. They think it would work and could raise one-quarter of a trillion pounds over five years.\u201d<\/p>\n
This is a striking conclusion and the fact that the conversation has been restarted makes you wonder, will this gain traction especially when other tax revenues are politically off\u2011limits.<\/p>\n
A shift toward taxing wealth also raises a broader question: much of that wealth is paper wealth, i.e. tied up in land, private businesses, or unrealised gains. Taxing these values may create unintended consequences.<\/p>\n
These consequences also interact with a broader economic principle: the Laffer curve. Traditionally applied to income tax, it illustrates that beyond a certain point, higher tax rates can reduce overall tax revenue. When applied to wealth taxes especially those based on illiquid or volatile assets the risk of diminishing returns becomes more pronounced.<\/p>\n
If tax policy targets valuations rather than income, several effects can shrink the tax revenue:<\/p>\n
Taken together, these factors highlight a key pressure – the higher the tax burden on illiquid or volatile assets, the greater the risk that the tax base shrinks rather than grows. This is particularly relevant for farms, land rich estates and private companies where valuations do not necessarily reflect cashflow.<\/p>\n
The uncertainty facing clients does not stem from what has been announced, but from what has not been announced. The government has signalled a willingness to revisit capital taxation, yet has provided no clear roadmap, timelines or scope. This lack of clarity is itself the risk: planning becomes harder, and assumptions that were previously safe now need to be revisited.<\/p>\n
With Income Tax, VAT and employee NICs politically protected, the logical target becomes taxes on wealth and capital. The direction of travel is already visible with:<\/p>\n
The question now being asked is whether CGT rates could be aligned with Income Tax rates.<\/p>\n
Advisers need to be proactively discussing estate planning with their clients. A potential care levy, tighter reliefs, increased HMRC challenge and the emerging risk of taxing paper wealth mean clients must revisit:<\/p>\n
The combination of political signalling and suggestions of reform means passive planning is now a genuine risk.<\/p>\n
For BPR, the trading vs investment distinction is sharper than ever. HMRC challenge is increasing, and borderline cases are becoming harder to defend. Businesses relying on BPR must ensure their trading status is genuine and can be clearly evidenced.<\/p>\n
This includes reviewing business activities, keeping contemporaneous evidence to support your views, and ensuring investment type activities do not dominate the overall business.<\/p>\n
Final thoughts<\/strong><\/p>\n The direction of travel in UK tax policy is clear – the system is steadily shifting toward greater taxation of wealth. Not through a single dramatic reform, but through a series of incremental changes – tightening reliefs, adjusting thresholds, and testing public appetite for new approaches. For business owners and individuals with private wealth, this is a critical moment to ensure their affairs are in order. With further change being signalled, it is prudent to review your estate and obtain tailored advice so that planning remains robust, flexible and aligned with the evolving landscape.<\/p>\n Get in touch<\/p>\n Any questions, please call Reena Bhudia on 020 7874 8855 or email reena.bhudia@goodmanjones.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Every so often, the tax conversation in the UK shifts. This is usually driven by the news headlines and because of the way politicians start talking about tax. And recently, Andy Burnham\u2019s comments have done exactly that. He\u2019s been clear that day to day public services should be funded by tax revenue, but equally clear[…] <\/p>\n