The Chancellor has seemingly all but confirmed that tax rises now need to be considered ahead of the Autumn budget, outlining there are “costs to what happened” with recent events and “as we move into the budget for the autumn, I do want to bring people into those trade-offs”.

This in turn appears to have fuelled renewed claims that a new wealth tax in the UK would generate significant additional tax receipts. Such claims may well be viewed with some scepticism in the Treasury. Indeed, Rachel Reeves herself seemingly ruled this out earlier in the year, stating “I’ve been really clear about this on a number of occasions…We’re not interested in a wealth tax”.

A lot can change in a few months and the Chancellor may now feel that all options must be given some consideration. As we have outlined previously however, it is highly uncertain that an annual wealth tax of 2% payable by individuals with wealth over £10m would actually raise the advertised figure of £24bn per year.

As a result, it seems much more likely that the existing levers to tax wealth will be pulled instead. We look at the various options remaining to the Chancellor to increase the tax take from wealth and which are more likely to come under consideration.

Two clear options for any chancellor in increasing taxes on wealth are capital gains tax (CGT) and inheritance tax (IHT). The difficulty facing the Treasury at the moment is that significant changes to these taxes were announced in the Autumn Budget 2024 but there are still some options available that may have been previously disregarded.

Some suggest that Rachel Reeves should look again at the rate of CGT and look to increase this further. This is a possibility but recent modelling from HMRC appears to confirm the view we expressed recently that such a move could backfire. HMRC estimates suggest that an increase in the higher rate of CGT could in fact result in lower tax receipts of £3.565bn by 2028/29.

While increasing CGT rates may be counterproductive, there is one option which could be justified as a simplification to the tax system but may prove unpopular as it could impact many families. This is commonly known as the CGT uplift on death.

Currently, when an individual dies, the cost of their assets for CGT purposes is rebased (often uplifted) to the market value at the date of death. This effectively wipes out any capital gains and losses accrued during their lifetime.

There have been various advocates for removing this rebasing in the past, including the now-disbanded Office of Tax Simplification, which was the government’s independent adviser on simplifying the tax system.

Removing this rebasing would likely mean that beneficiaries of an estate inherit the deceased’s original acquisition cost of an asset. This would mean that IHT might be due on an asset and then a subsequent disposal would be subject to CGT on the full capital gain.

Alternatively, some suggest it might operate by allowing a beneficiary to elect to pay CGT on death and then pay IHT on the net value of the asset, after CGT. By way of illustration, if someone inherited a rental property with a net value and capital gain of £100,000, they could pay as much as £24,000 in CGT and then £30,400 in IHT on the net amount of £76,000. This would equate to an overall tax rate of 54% on the inherited property.

Another area under potential scrutiny is the residence nil rate band (RNRB) for IHT. Introduced in 2017, the RNRB potentially allows individuals to pass on an additional £175,000 of their main residence to direct descendants free of IHT, on top of the standard nil rate band. The RNRB is much maligned amongst advisers as it adds considerable complexity to the IHT system. Its removal or reform could simplify the tax and increase receipts, though it is also likely to be controversial given the nil rate band has remained frozen at £325,000 since 2009.

There are various other options that might be explored, including a new property tax to replace council tax and changes to dividend taxation. Whilst the Chancellor may ultimately rule out a wealth tax in name, the pressure to raise revenue means that wealth will almost certainly be a target for heavier taxation in the budget ahead.