Wealth – issues, inequalities, and taxes

The question of wealth is one that generates debate amongst commentators and politicians.  Great disparities in wealth are regarded by some as a problem – evidence of an unequal society with all that that implies.  The response of those seeking to rectify inequalities includes taxes on wealth and or the transfer of wealth.  The former often suggest a % charge on wealth over a certain threshold. The latter including inheritance taxes, recent changes to which for farmland have resulted in considerable concern amongst the farming community.

 

What do the figures show?

In the period April 2020 to March 2022:

Median household wealth in Great Britain was £293,700.

 

The wealthiest 10% of households had household wealth of £1,200,500 or more, while the least wealthy 10% had £16,500 or less.

 

Median household wealth varied by region, with the largest difference seen between the South East (£489,800) and the North East (£179,900).

 

Net property wealth made up the largest proportion of household wealth (40%), followed by private pension wealth (35%), while net financial wealth (14%) and physical wealth (10%) made up much smaller proportions.

 

Median household financial wealth increased by £2,100 (25%), in real terms since the April 2018 to March 2020 period, to £10,400.

 

Households who owned their property outright, and households with a head aged between 65 and 74 years, saw the largest increases in median household financial wealth, at £4,300 (8%) and £3,300 (12%),

Respectively.

 

Private pension wealth ranged from 28% of household wealth in London, to 42% in the North East and Scotland.

[ONS, Household wealth].

 

The main problem with comparing wealth particularly for tax purposes is that the different categories are not quite the same. In value yes but that could be rather meaningless in practical terms, particularly when it comes to tax.  That is because there are issues around what wealth actually means.  If we take house values, we find that in Bromley in March 2025 the average house value was £520,839. In comparison in Rhondda Cynon Taf the figure was £151,183.  So does this mean the average owner in Bromley is 3.4 times wealthier than the average owner in Rhondda Cynon Taf?

 

In one sense the answer is yes but in another no.  If a householder in Bromley stays within the area the likely hood is that if they sold the property a new one would cost a similar amount. The exchange value is therefore the same. If however a household from Bromley were to move to Rhondda Cynon Taf, buying a similar property they would end up with a surplus of say £370 thousand. 

 

Looking at farming and wealth we find that the average net worth of a UK farm was approximately £2.4 million in 2023/24. [AI generated data]. In other words the wealth of the average farming household is eight times the average level of wealth. But a farm is essentially working capital, necessary to operate the business.  The wealth value is not the same as money in the bank – ready to be splashed on holidays etc! 

 

The assets used to provide private pensions are also classified as wealth on the basis that funds have been invested in shares etc. 

 

In essence we have three main categories of wealth. The question is, is that is wealth in one category the same as wealth in another and if not how should it be regarded for tax purposes?

 

 

References

Office for National Statistics, 24 January 2025, Household total wealth in Great Britain: April 2020 to March 2022.  Main results of household wealth from the eighth round of the Wealth and Assets, Survey covering the period April 2020 to March 2022, Statistical bulletin.