Chancellor John Healey has decided against raising Capital Gains Tax ahead of his Budget announcement, dismissing pressure from some within his own party to increase the rate.
Several Labour figures had previously advocated for higher CGT, with Cabinet Secretary Louise Haigh and Defence Secretary Wes Streeting both having voiced support for raising the tax or moving it closer to income tax rates before Andy Burnham became prime minister in July. Haigh had argued that such a move would shift taxation burden away from work toward unproductive capital accumulation, while Streeting called for a “wealth tax that works” and described the current system as unfairly penalizing work.
However, Healey’s decision reflects concerns about potential economic consequences. Treasury analysis suggested that while raising the lower CGT rate by one percentage point could generate £5 million by 2028-9, increasing the higher rate by 10 percent would actually reduce government revenue by £3.6 billion in the same period. Officials warned that wealthy individuals could respond to rate increases by relocating abroad or deferring asset sales, ultimately costing the government money.
The chancellor previously indicated his policy direction in a speech last month, emphasizing his desire to see Britain as “a country of wealth creation” and expressing the importance of government decisions that boost business confidence and investment. He has also ruled out completely equalizing CGT and income tax rates, according to recent reports.
Healey faces a complex fiscal environment as he prepares to present his first Budget on 28 October. Labour’s 2024 manifesto pledges limit his options, having committed not to increase income tax, National Insurance, and VAT. The government also operates under self-imposed borrowing restrictions, narrowing available revenue-raising measures.
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