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Downing Street has left open the door to higher taxes on the wealthy to close a growing UK fiscal hole, as the Treasury promised to “protect working people” in what is expected to be a painful autumn Budget.
Number 10 on Monday declined to rule out tax increases on the rich after former Labour leader Lord Neil Kinnock said a new wealth tax could help fill the hole in the public finances.
Kinnock has called for a 2 per cent tax on assets over £10mn, claiming it would raise more than £10bn a year.
With chancellor Rachel Reeves under growing Labour pressure to increase taxes on the rich in her autumn Budget, a spokesman for Sir Keir Starmer said: “The prime minister has repeatedly said those with the broadest shoulders should carry the largest burden.”
Reeves is facing calls to raise taxes on the rich after the government’s £5bn retreat on welfare reform last week, despite the chancellor having ruled out a wealth levy on several occasions, including in April.
Allies of Reeves said she was well aware of the risk of punishing wealth creators or driving rich people abroad, but her political options were narrowing.
“We’re doing quite a lot to tax the wealthy,” one ally said. Reeves’ Budget last year raised levies on wealthy people in the UK who claim their domicile is overseas, as well as increased taxes on private jets, capital gains and private schools.
The Treasury has little or no appetite for creating a new wealth tax, although government officials have not ruled out increasing the rates of existing taxes, which would affect the better off.
“Tax decisions are taken at the Budget and, as you expect, we are not going to comment on tax speculation,” the Treasury said on Monday.
“We have made our manifesto promises to protect working people and we took the decision last autumn to deliver the change the British people voted for.”
The Treasury is concerned by wealthy people leaving after Reeves tightened non-dom rules in her last Budget and is considering diluting the proposals to stop the departures.
Lord Nick Macpherson, a former top Treasury official, warned Labour not to open a new front on “footloose billionaires”, saying a wealth tax could drive more rich people overseas.
Macpherson, now chair of the private bank C Hoare & Co, said: “Why would a government which has almost certainly lost revenue on its non-dom reforms open up a new front on footloose billionaires? It would lose revenue, and is no substitute for taxing income or consumption.”
Economists have estimated Reeves could face a fiscal hole of £20bn or more at her autumn Budget as a result of the government’s retreats on reforms to welfare and pensioners’ winter fuel payments, as well as possible downgrades to growth forecasts.
Reeves has ruled out any relaxation of her borrowing rules and acknowledged that forcing spending cuts through parliament will be tough, leaving big tax rises as the most likely solution.
She said in 2023 that she had “no plans for a wealth tax”, a position she restated in April 2025, when she told the Telegraph: “We’re not interested in a wealth tax.”
However, Sir Mel Stride, shadow chancellor, said: “Labour’s attack on business and wealth creation has already seen scores of wealthy taxpayers leave the UK. Now they appear to be gearing up for fresh tax raids to pay for their costly U-turns.”
Arun Advani, a tax specialist at Warwick University, said an annual tax on the wealthy would, to be practical, need to be focused on very large amounts of wealth, given the need for HM Revenue & Customs to oversee annual valuations of the assets involved.
He said a levy on individual wealth in excess of £10mn at 1 per cent a year could work and would raise close to £12bn, but added there were multiple other ways of increasing taxes on the wealthy.
These range from reforms of capital gains tax and inheritance tax to heftier levies on property.
He has calculated, for example, that extending national insurance contributions to landlords, shareholders and other investments would raise about £10bn a year.
Stuart Adam, an economist at the Institute for Fiscal Studies, a think-tank, said international experience suggested it was often difficult to make wealth taxes work, partly because of concerns about tax avoidance.
Spain has both a wealth tax and a temporary “solidarity tax on large fortunes”, with the latter requiring those with assets of more than €3mn to pay an annual levy of at least 1.7 per cent on their value.
The taxes have not triggered a notable exodus, but lawyers said they have encouraged some wealthy Latin Americans with homes in Spain to spend less than 183 days there each year so they do not become tax residents.
