Abstract
This chapter discusses the taxes on capital in the UK. Taxes on capital are: capital transfer tax, capital gains tax, and wealth tax. The first two only are levied in the UK. They are imposed for the purpose of redistributing wealth rather than to raise revenue. Capital taxes are not suitable for management of a national economy. A capital transfer tax can be imposed on either the estate or on the inheritance principle. It is payable on transfer of capital in lifetime or on death. The British capital transfer tax is assessed on estates. The rate of tax is progressive. A capital gains tax is levied on capital gains that are made on the disposal of assets. It can be a tax on short term gains or on all capital gains irrespective of how long an asset had been held. Gains above an exemption limit are subject to a flat percentage rate of tax. A wealth tax can be a “once and for all” or an annual tax. It is levied on either an additive or a substitutive basis. Several countries have imposed a wealth tax in addition to the other taxes on capital. All capital taxes require a valuation of assets. The choice of method—that is, open market valuation, expert valuation, or self-assessment—depends on the type of asset and the size of the estate. Inflation increases the burden of all capital taxes unless exemption levels and tax bands are index-linked.
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