A Scottish Wealth Tax: What Does The Scottish Government's Review Tell Us?

The Scottish Government recently published its review of wealth taxation in Scotland. The report does not recommend introducing a wealth tax, but it does consider whether one could operate effectively within Scotland's fiscal and constitutional framework.

The wider concept of a wealth tax is not new. The debate received significant attention following the Wealth Tax Commission's 2020 report, which examined whether a one-off UK wealth tax could be used to raise revenue in response to the economic effects of the COVID-19 pandemic. We have previously considered the wider debate around the taxation of accumulated wealth and the potential implications of a UK wealth tax for succession and estate planning. While the Scottish Government's report focuses specifically on Scotland's devolved tax landscape, it forms part of the same ongoing discussion about how accumulated wealth should be taxed.

Why does this matter?

For many individuals, families and business owners, a Scottish wealth tax may feel unlikely or a long way off.

That may well be the case. However, the report highlights that wealth taxation remains firmly on the political agenda. Questions around wealth inequality, succession planning, property ownership and the taxation of investments are likely to remain areas of focus for policymakers in the years ahead.

Importantly, the report also acknowledges that wealth is already taxed in a number of ways through inheritance tax, capital gains tax, council tax and LBTT. Rather than introducing an entirely new tax, it suggests that some of the objectives behind a wealth tax could potentially be achieved through further reform of existing taxes.

That is particularly relevant in light of recent inheritance tax changes announced in the Autumn UK Budget 2024 affecting business owners and trusts, which we have discussed previously.

Could Scotland introduce a wealth tax?

The report's answer is essentially "yes, but it would be complicated".

Drawing on international experience, it concludes that wealth taxes are neither inherently unworkable nor guaranteed to succeed. Their effectiveness depends heavily on how they are designed, how they are administered and how taxpayers respond to them.

The report also identifies particular challenges for Scotland. These include the practical difficulties of valuing assets, the cost and complexity of administering a new tax, and the fact that Scotland remains part of a wider UK tax system in which many taxes on capital remain reserved to Westminster.

In short, introducing a wealth tax is not simply a question of setting a rate and deciding who should pay it.

What does this tell us about the direction of travel?

One of the more interesting aspects of the report is that it points towards reform of existing taxes as a possible alternative to creating an entirely new wealth tax.

In particular, the report highlights council tax, capital gains tax and inheritance tax as areas where further reform could increase the taxation of wealth without the complexity of introducing a new tax.

That reflects a broader trend which many individuals and business owners will already be aware of. Recent years have seen significant changes to inheritance tax reliefs, while the Scottish Government has also announced plans for new council tax bands for higher-value properties. We looked at those proposals in our Scottish Budget 2026/27 tax update.

Whether there is ultimately a Scottish wealth tax or not, the report suggests that the taxation of accumulated wealth is likely to remain a key area of policy discussion.

Should you do anything now?

In short, no.

The report does not announce any new tax and there is currently no detailed proposal for a Scottish wealth tax.

That said, it is a useful reminder that succession, estate and tax planning should be reviewed regularly rather than only when legislation changes.

In particular:

• business owners should ensure succession plans remain appropriate in light of the changes announced in Autumn UK Budget 2024 to inheritance tax reliefs;
• individuals with significant property holdings in Scotland should keep developments in Scottish property taxation under review;
• families using trusts as part of their estate planning should remain alert to future tax changes affecting wealth transfers.

So what is certain?

A Scottish wealth tax remains a topic of debate rather than an imminent reality.

What is clear from the report, however, is that policymakers continue to focus on the taxation of accumulated wealth. Whether that ultimately leads to a new wealth tax or further reform of existing taxes remains to be seen. For individuals, families and business owners, the more important message is to ensure that existing succession, estate and tax planning arrangements remain fit for purpose in a tax landscape that continues to evolve – both at a Scottish and UK level.