Will Scotland get a wealth tax?

New Scottish Government research examines whether a wealth tax could work in Scotland. Undertaken by Ipsos Mori and Fraser of Allander, the study explores key challenges, including wealth mobility, administrative capacity and the constraints for Scotland’s devolved tax framework.

Wealth tax has moved from an academic debate onto the policy agenda. But discussions often confuse a wealth tax with other ways of taxing wealth.

What is wealth tax?

Wealth tax is a tax on all (or nearly all) of the net assets of an individual. It generally applies to someone’s wealth minus their debts. In the UK, while there is currently no wealth tax, we have taxes on wealth – for example inheritance tax, capital gains tax and council tax.

Many discussions conflate wealth tax with other means of taxing wealth. While both wealth tax and taxes on wealth are concerned with assets rather than income, fundamentally the difference is how they tax that wealth.

Taxes on wealth are on specific assets and usually (though not always) fall when an event occurs. For example, the sale of an asset triggers capital gains tax. By contrast, a wealth tax would consider an individual’s total wealth (investments, assets, property etc) minus applicable debts, and then apply an annual or one-off tax charge.

As a means of taxation, wealth tax has diminished in popularity over the past few decades with only Switzerland, Norway and Spain continuing to operate an annual wealth tax in Europe. Wealth taxes are generally hard to administer, due to the need to have accurate valuations, and don’t generate significant revenues in the countries where they still exist.

Our earlier article discusses the topic in more detail.

How do we define wealth?

Wealth taxes seek to tax wealth, but it's important to determine exactly what we mean by wealth.

In this context, it's generally understood to be accumulated resources or assets, not income from employment, savings interest or dividends. Therefore, property, investments, pensions, or inherited assets are all within the scope of a potential wealth tax. However, applying a tax charge on these items can create liquidity issues as there’s no income associated with the asset with which to pay the tax.

In current discussions on wealth tax, the idea of wealth and the wealthy are used almost interchangeably. Who should pay a wealth tax? Is it anyone who has wealth above a certain value in the form of investments or property, or will it be those individuals who we consider to be wealthy, the super-rich? Ultimately, this is a policy choice, but one which will determine how the tax is designed and what it’s trying to achieve.

Why is wealth tax on the agenda?

The resurgence of interest in wealth taxation coincides with widening wealth inequality and challenging fiscal outlooks.

Wealth inequality is more pronounced than income inequality across the globe and this ultimately has an impact on social and economic outcomes. Globally, the 2026 World Inequality Report recognises that the richest 10% of the global population own nearly 75% of all wealth, while the poorest half hold barely 2%.

For Scotland, Fraser of Allander reported that the wealthiest 2% of households held around 15% of total wealth in Scotland, whereas for income, the top 2% of households have a 10% share of total income.

The 2026 Wealth Inequality Report shows that wealth inequality reinforces lack of opportunity and structural imbalances between countries, with notable impacts for climate equality. The wealthiest individuals contribute disproportionately to carbon emissions, but it's the poorest individuals (and nations) who often feel the effects of climate change most.

Regarding the economy, the Fairness Foundation’s Wealth Gap Risk Register 2025 finds that wealth inequality contributes to a lack of productivity by encouraging rent and wealth extraction. 

Addressing wealth inequality therefore becomes a priority for governments with an interest in addressing economic, social and climate challenges. However, while wealth inequality and absolute differences in wealth are a clear issue, what’s less clear is whether a wealth tax is an effective mechanism to address it.

Wealth tax in Scotland

The research published by the Scottish Government on 21 August acknowledges the challenges of implementing a wealth tax in Scotland but remains open to the possibility. 

One of Scotland's major challenges is the mobility of wealth. Wealth is highly sensitive to taxation and so it’s not unusual to see behavioural changes when governments attempt to tax wealth more. These can include relocation, restructuring investments, tax planning or delaying significant transactions.

For Scotland, being part of the UK and within the devolved tax framework makes opportunities for internal migration easier. Taxpayers can relocate to another part of the UK, with no exit taxes and no immigration issues, if they decide that they don’t want to pay a Scottish wealth tax.

Being highly sensitive to behavioural changes also means that the revenues generated from a wealth tax are unpredictable. The tax base for a wealth tax would likely be a small population, with the means to restructure their affairs (whether by relocation, portfolio allocation or some other method).

Another major barrier to wealth tax is administrative capacity. To tax wealth, there needs to be a method of identifying, recording and valuing assets. This is a significant undertaking, and one which Revenue Scotland doesn’t currently have the capacity to achieve. The report acknowledges that either Revenue Scotland would need a substantial boost in funds to take on the task, or else it would need to rely on HMRC systems. Precisely for this reason, a local wealth tax would be infeasible since local authority systems couldn’t cope with the administration required.

The Scottish Government has previously mentioned local tax as a possible route to explore wealth taxation in Scotland. This bypasses the challenge of implementing a national wealth tax, which would require UK approval and co-ordination, but the report is clear that the capacity to administer a wealth tax far surpasses even that of Revenue Scotland, never mind a single local authority. 

A new national tax, if approved by the UK Government, would have consequences for the block grant. This may even be the case if there is only a Scottish wealth tax and no UK equivalent is implemented.

Could a wealth tax work in Scotland?

The report is transparent about the challenges of implementing a wealth tax in Scotland. For the reasons discussed above, a wealth tax as a practical solution to both fiscal sustainability and wealth inequality would face significant hurdles.

Fraser of Allander considers that alongside the volatility of tax revenues, a wealth tax in Scotland would need to overcome significant design and administration issues. For this reason, they suggest that reforming existing taxes on wealth may be the more practical solution. 

This is also the conclusion reached by the International Monetary Fund (IMF) in their report How to Tax Wealth. The IMF supported the reform of existing taxes as an alternative to introducing new wealth taxes, on the basis that the effectiveness of a new wealth tax depends on the existing tax framework and is often undermined by the difficulty of enforcement.

In the Scottish context, there's considerable complexity in the existing tax framework and this, combined with the lack of administrative capacity and anticipated behavioural responses, may mean that a wealth tax provides very little fiscal benefit.