Savers and investors could face an extra £90bn in tax over five years as a left wing think tank has called for a major increase in wealth tax to fix the UK's ‘unfair and outdated' regime.
The Institute for Public Policy Research (IPPR) described the country's tax structure as "unfair and outdated" and said a complete overhaul was needed to service the government's spending plans.
It called for capital gains tax (CGT), which is applied on sales of shares, bonds, property and other investments, to be paid at the same rate as income tax. Researchers said the system unfairly benefited the country's wealthiest taxpayers, as they were more likely to own investments.
It is profoundly unjust that those who work for their incomes are taxed more highly than those whose income is derived from wealth"
"It is profoundly unjust that those who work for their incomes are taxed more highly than those whose income is derived from wealth," the study said.
"This situation is all the worse when we consider that the wealthiest are less likely to generate their income from labour than the rest of us. Among the richest 1%, over one-quarter of total income is generated from dividends and partnership income alone."
The study from the Institute for Public Policy Research called for a two-stage transition to a new framework which would be "simpler, more progressive and better able to raise public money". The first phase would see capital gains taxed at the same rate as income and tax reliefs on capital gains abolished.
"We estimate this could raise up to £120bn over five years, falling to £90bn when accounting for potential behavioural effects," the study said.
Capital gains tax on people's wealth held in investments and the sale of second homes and buy-to-lets should be hiked to income tax levels, while the annual exempt allowance of £12,000 should be slashed to £1,000, it said.
Under the Just Tax plans published by the Institute for Public Policy Research, a basic rate income tax payer would face a CGT hike from 10% on investments and 18% on home sales to 20% across the board.
Higher or additional-rate taxpayers currently have CGT levied at 20% on their assets and 28% on properties which are not their main home.
They would see their CGT rates soar to their income tax levels of 40% and 45% respectively, according to the report.
Proposals also include scrapping tax reliefs for entrepreneurs, holders of government and some corporate bonds and those who inherit wealth.
The moves could double tax bills for self-employed traders and partners who avoid income tax by paying themselves through dividends or capital gains.