Recent data shows that these types of capital gains are creating shocking inequalities across the United Kingdom. Wealthier London Docklands area residents, for example, have reaped billions in property profits not shared with residents elsewhere. Perhaps most surprising were the implications in the findings that suggested Kensington by itself has gained in capital losses value than all of Wales’s people combined. The capital gains from Hampstead and Kilburn have outstripped regeneration of the entire north east of England.
Between 2015 and 2019, Notting Hill inhabitants were living through a period of remarkable capital appreciation. Their profits were larger than the profits of Liverpool, Manchester and Newcastle combined. These figures underscore a troubling trend: a mere 0.1% of UK adults, approximately 50,000 individuals, received an astonishing 86.4% of total capital gains, which amounts to around £56 billion.
Concentration of wealth is as shocking as poverty. Today, half of the country’s capital gains are concentrated in the hands of only 100 people—just enough to fill the Albert Hall. It’s a staggering 97% of the population who will never experience a single capital gain during their entire life. This creates very serious equity concerns in the fairness of our tax code.
In Kensington, a small grid of streets is home to just 6,400 residents. This was an area with capital gains far in excess of the rest of Wales. In fact, five London constituencies—Kensington, the cities of London and Westminster, Chelsea and Fulham, Hampstead and Kilburn, and Richmond Park—each reported more capital gains than both the north east and Northern Ireland combined.
To make matters worse, the taxation framework capital gains perplexingly adds fuel to this fire. The tax rate on these gains can be as low as 10% and as high as 28%. This difference as calculated varies widely based on the taxpayer income level and asset class. The lower rate on carried interest than income earned through work has brought the ire of President Trump, House Speaker Paul Ryan, and Senator Chuck Schumer.
The inequity isn’t just state-by-state. It includes national political leaders as well. Prime Minister Rishi Sunak declared earnings of £2.2 million last year. He was subject to an effective tax rate of 23% on that money. Even Labour leader Keir Starmer was hit with an expensive capital gains tax bill of £52,688. This bill followed his taking home an astounding £275,739 for the sale of a field in December of 2022.
“There are more capital gains in Kensington than the whole of Wales, and more in Hampstead and Kilburn than the north east of England. Continuing to tax these gains at a lower rate than earnings from work is the complete opposite of ‘levelling up.’”
On Wednesday in IFS context Rachel Reeves set out some of the reasons why people might expect to benefit from capital gains taxation. She noted,
This perspective highlights a significant aspect of the debate surrounding capital gains tax: balancing the need for revenue with the support for entrepreneurs and small business owners.
“There are people who have built up their own businesses who maybe at retirement want to sell that business. They may not have had huge income through their life if they’ve re-invested in their business, but this is their retirement pot of money.”
Keen to provoke a discussion on the fairness of capital gains taxation. It is obvious that the status quo rewards a privileged few at great expense to the public. Critics argue that structural changes are necessary to ensure a more equitable distribution of wealth and opportunity across regions in the UK.
As discussions continue regarding the fairness of capital gains taxation, it becomes increasingly clear that the current system disproportionately favors a select few at the expense of the broader population. Critics argue that structural changes are necessary to ensure a more equitable distribution of wealth and opportunity across regions in the UK.