12th August 2026
Britain's Ownership Problem: Should Capital Gains and Inheritance Be Taxed More Like Income?
Britain has spent years arguing about income inequality.
Perhaps we have been looking at the wrong measure.
The more fundamental divide may increasingly be between people who own assets and people who do not.
A person can work hard for 40 years, pay tax throughout their working life and still reach retirement with modest savings and no property.
Another person may have bought a house decades ago, inherited property or accumulated shares and other investments. The assets can then rise in value, generate income and provide the capital needed to acquire yet more assets.
Both people may have worked hard.
But their financial outcomes can be dramatically different.
That raises an uncomfortable question:
Has Britain created an economy in which ownership itself has become the easiest route to acquiring more wealth?
The Monopoly effect
There is an old board game that provides a surprisingly good analogy for modern capitalism: Monopoly.
Once you own valuable properties, other players pay you rent. That income allows you to acquire more properties, which generate more rent.
The more you own, the easier it becomes to acquire still more.
Britain's economy is obviously far more complicated than a board game, but there is a similar mechanism at work:
Own assets → receive income or capital gains → accumulate more capital → buy more assets → receive more income and gains.
For somebody starting with little or no capital, the process works in reverse.
Earn wages → pay housing and living costs → save what remains → struggle to acquire assets → continue relying mainly on wages.
That difference matters enormously.
A house can be both something you worked for and something that made you wealthy
This is where the argument becomes complicated.
A homeowner who bought a house 30 or 40 years ago can quite legitimately say:
“I worked hard for my house.”
They may have saved a deposit, worked overtime, paid a mortgage for decades and maintained the property.
That achievement should not be dismissed.
But the increase in the property's value is a different matter.
A house bought for £80,000 that is now worth £350,000 did not necessarily increase in value because the owner worked harder.
Its value may have risen because Britain built too few houses, the population increased, demand grew, planning restrictions limited supply and the surrounding economy changed.
The owner benefited from those circumstances because they owned the asset.
The renter did not.
This is where the ownership divide becomes particularly serious
Consider two people of similar age and income.
One owns a mortgage-free home worth £400,000.
The other has rented for decades and has £20,000 in savings.
Their incomes might be similar.
Their economic security is not.
The homeowner possesses an asset that can appreciate, can potentially be borrowed against and can eventually be passed to their children.
The renter continues paying for somewhere to live without accumulating the underlying property.
This is one reason the housing crisis is about much more than accommodation.
It is also about wealth creation and social mobility.
If younger generations cannot realistically buy homes without substantial help from parents, property ownership begins to depend increasingly on whether your family already owns property.
That risks turning an achievement based on individual effort into an advantage passed from one generation to another.
The capital-gains question
This brings us to Capital Gains Tax.
Why should £50,000 received from employment necessarily be treated differently from £50,000 of real economic gain made from selling an asset?
There are legitimate reasons for different treatment.
Investment involves risk. Capital may already have been taxed before it was invested. Inflation can make a nominal gain look larger than the real gain.
These issues matter.
But there is still a fundamental question:
Should the tax system automatically favour income simply because it comes from owning an asset rather than working?
Perhaps capital gains should move considerably closer to income-tax treatment, while allowing sensible adjustments for inflation, genuine investment costs and productive investment.
The objective would not be to punish investment.
It would be to reduce the tax system's preference for wealth generated simply through ownership.
But property is different again
A large proportion of Britain's wealth is tied up in property.
And property has a particularly important characteristic:
You cannot create more land.
When demand increases while supply remains restricted, land values can rise dramatically.
That creates what economists describe as an economic rent — income or value arising partly from scarcity rather than from additional productive effort.
That suggests another possibility.
Instead of taxing work more heavily, Britain could consider capturing more of the economic value created by scarce land and property.
That could include:
reforming council tax;
land-value taxation;
better taxation of second and investment properties;
capturing part of land-value increases created by planning permission;
taxation of vacant property;
and changes to the treatment of very large property gains.
The aim would not be to punish ordinary homeowners.
It would be to recognise that some increases in property wealth arise from the wider economy and society, not simply from the actions of the owner.
Then comes inheritance
Inheritance is perhaps the clearest example of wealth being transferred without the recipient having earned it.
A parent may have worked hard and accumulated a valuable property portfolio.
Their children may inherit millions without having performed the work that generated the original wealth.
Again, that does not make inheritance immoral.
Parents naturally want to help their children.
But there is a broader economic question:
How much inherited economic power should one generation be able to transfer to the next without taxation?
The answer matters because inheritance can perpetuate ownership inequality.
Imagine a house purchased decades ago for £50,000 eventually being inherited when it is worth £500,000 or more.
The increasing value may have had little to do with the work of the person receiving it.
It is the consequence of ownership, scarcity and time.
Without some form of taxation, that wealth can then be passed onwards again.
Ownership becomes self-reproducing.
But inheritance tax has a serious problem
Britain's existing inheritance-tax system is widely unpopular partly because people feel they have already paid tax throughout their lives.
There is also a legitimate concern about families being asset-rich but cash-poor.
An elderly person may own a valuable home without having anything like the income required to pay a large annual tax bill.
That is why any reform would need to distinguish between economic wealth and immediate ability to pay.
Tax could potentially be collected when an asset is sold or transferred rather than forcing people to sell during their lifetime.
What if we taxed work less and ownership more?
This is where the argument becomes much more interesting.
Britain could consider a different balance:
Work: progressive but reasonable taxation.
Enterprise: taxation that recognises risk and investment.
Capital gains: treatment closer to income, with sensible allowances for inflation and legitimate costs.
Land and scarcity rents: greater taxation.
Large inheritances: greater contribution when substantial wealth passes between generations.
The revenue could then be used not simply to fund Government spending, but to address another problem: the lack of ownership among younger and poorer households.
From welfare state to ownership society
This connects with an even more ambitious idea.
Suppose Britain provided every adult with a guaranteed minimum income, with the payment gradually recovered through the tax system as earnings increased.
Someone who did not work would still have a basic floor.
Someone earning £20,000 would be considerably better off.
Someone earning £50,000 would repay more of the payment through taxation.
Someone on a very high income might repay all of it.
The purpose would not simply be redistribution.
It would be to ensure that nobody is forced into poverty simply because they have temporarily lost employment or cannot find enough work.
At the same time, the system could make employment more attractive because taking a job would not suddenly mean losing essential support.
There could also be a wider economic effect.
Lower-income households tend to spend a larger proportion of additional income than wealthy households. More spending can therefore support local businesses and employment, although the multiplier effect should not be exaggerated: some additional demand would leak into imports and some could produce inflation if the economy were operating near capacity.
And then comes the taxman's question
How would we pay for it?
This is where taxation of assets becomes relevant.
Britain already raises substantial revenue from taxation of income and consumption. But a larger contribution from capital gains, land and high-value asset transfers could potentially help fund a stronger minimum-income floor.
The objective would be to move some taxation away from productive activity and towards economic rents and accumulated capital gains.
That is a very different proposition from simply increasing income-tax rates.
But there is a danger
Britain should not make the mistake of assuming that everyone who owns an asset is wealthy.
Millions of people own their homes but have relatively modest incomes.
A pensioner living in a mortgage-free £400,000 house is not equivalent to somebody with £400,000 in readily available investments.
That distinction must be protected.
Any asset-based taxation would therefore need:
substantial thresholds;
protection for modest primary residences;
deferral mechanisms for people with low incomes;
careful treatment of pensions;
protection against forcing people to sell homes simply because their paper value has increased.
Otherwise a policy intended to reduce inequality could create a new injustice.
The bigger question
Perhaps Britain's debate about inequality needs to change.
Instead of asking only:
“Who earns the most?”
we should also ask:
“Who owns the assets that generate future income and future capital gains?”
And then:
“How easily can someone without assets become an owner?”
Those questions take us beyond the traditional left-versus-right argument.
A successful entrepreneur who creates a valuable company should be able to become very wealthy.
A family who works hard and buys a home should be able to benefit from that achievement.
An investor who takes genuine risks should receive a return.
But a society also needs to consider what happens when ownership becomes so concentrated that owning assets becomes the principal route to acquiring more assets.
That is where inequality can become self-perpetuating.
Britain may need a new settlement
The answer is not to abolish ownership.
It may be to spread ownership more widely.
That could mean:
Tax work less heavily.
Tax economic rents more effectively.
Build many more homes.
Make home ownership achievable for more people.
Encourage employee share ownership and long-term saving.
Reform capital-gains taxation.
Consider how large inheritances should contribute to society.
Guarantee a minimum income without creating a trap that discourages work.
And above all:
Give people who currently own little or nothing a realistic chance to acquire assets.
Because perhaps the biggest inequality of all isn't the difference between someone earning £30,000 and someone earning £100,000.
It is the difference between someone who owns £1 million of assets generating further wealth and someone who owns virtually nothing beyond their ability to work.
Britain has spent decades debating how to redistribute income.
Perhaps the next great economic debate should be about something deeper:
Who owns Britain — and how do we make sure that ownership does not become a privilege inherited rather than an opportunity earned?
Will Andy Burnham make a start with the budget in October?