The Rich Paid More Tax in 1949 Than They Do Today. Why?

Dr. Adam North discusses the decline of wealth taxes in the UK

Jul 15, 2025

In my last article, I challenged the idea that a wealth tax is economically ruinous by examining Spain’s thriving economy under one of Europe’s most progressive wealth tax systems. But the question I want to explore today is more local: If taxing wealth is so unthinkable, why did Britain do it for most of the 20th century?

The idea that wealth taxation is somehow un-British and anti-innovation is a relatively modern invention. In fact, the UK has a deep and largely forgotten history of taxing capital—through land taxes, estate duties, capital levies, and inheritance taxes—to fund wars, rebuild after crisis, and address inequality. It wasn’t only politically acceptable; it was once considered essential.

So, what changed?

The Long History of Wealth Taxation in Britain

From the late 19th century through to the 1970s, Britain employed some of the highest wealth taxes in the world. This wasn’t limited to income—it included capital and inheritance, and at times amounted to a partial redistribution of large estates.

In 1894, estate duties were introduced, with rates on the largest estates reaching 7.5%.
By the 1930s, that figure rose to 40%.
After World War II, it climbed to a staggering 65%.
In 1949, Chancellor Sir Stafford Cripps increased the top marginal rate on estates to 75%.
During the 1970s, Prime Minister Harold Wilson’s government debated a full annual wealth tax. Though it was never implemented, the very real political will for such a tax reflects how far public opinion has shifted since.

The justification then was clear: those with the most should contribute proportionally to national rebuilding and shared prosperity.

The Decline of Wealth Taxes

So why did the UK move away from wealth taxation?

Three key shifts stand out:

1. Global Capital Mobility
The 1980s ushered in globalisation, deregulated finance, and mobile capital. The ultra-rich were suddenly able to move assets offshore, and governments became reluctant to impose direct taxes on wealth for fear of losing high earners and investors.

2. Political Realignment
With the rise of Thatcherism and Reaganomics, the narrative shifted from redistribution to enterprise. Taxes on capital were reframed as disincentives to investment and growth. Wealth was to be admired and protected—not taxed.

3. Institutional Abandonment
In 1986, Capital Transfer Tax (introduced in 1974) was replaced with Inheritance Tax (IHT), and over time the real value of IHT fell as thresholds failed to keep up with asset inflation—especially house prices.

Today, despite IHT still being in place, it affects less than 4% of estates, and capital gains tax is riddled with exemptions, particularly on property and business assets.

Britain’s Forgotten Fiscal Tools

Until the late 1970s, the UK regularly published detailed estimates of personal wealth based on tax data, enabling policymakers to track the distribution of wealth. This practice was quietly discontinued after 1979, creating a significant data gap that remains largely unaddressed today.

Ironically, this erosion has occurred alongside rising wealth inequality. According to the Resolution Foundation, the top 1% of households now own nearly a quarter of all UK wealth, while younger generations struggle to afford homes or accumulate savings.

However, these tools could be reimplemented, and the Forbes Rich List and The Sunday Times Rich List shows that tracking tools can still effectively measure extreme wealth.

A Moment for Rediscovery

This historical amnesia of a once successful taxation system has consequences. When we forget that wealth taxation was once a core part of British economic policy, we are left vulnerable to myths: that it’s foreign, unworkable, or inherently unfair.

But the past tells a different story. Wealth taxes helped fund public services, finance wartime recovery, and create a more equitable society. They were not only viable—they were popular.

As we consider how to fund Britain’s future, the question isn’t whether wealth taxes are radical. The real question is: why did we abandon a tool that worked?