UK Chancellor John Healey Rejects Calls to Raise Capital Gains Tax
Chancellor John Healey is reportedly resisting pressure to increase Capital Gains Tax in the upcoming Budget amid concerns over lost revenue.
At a glance
- Chancellor John Healey has decided against raising Capital Gains Tax in next week's Budget.
- HMRC previously estimated a 10% increase in the higher rate could cut tax receipts by £3.6bn in 2028-29.
- Banking executives still expect tax rises on their sector following significant corporate profits.
Chancellor John Healey is set to reject calls from Labour MPs to increase Capital Gains Tax in next week's Budget, according to sources. The position follows warnings that increasing the tax could reduce revenue if wealthy individuals choose to leave the country or postpone selling their assets.
Capital Gains Tax applies to profits earned when selling assets that have grown in value, such as company shares and properties that are not primary residences. Basic-rate income taxpayers currently pay an 18% rate on these gains, while higher and additional-rate taxpayers pay 24%.
Treasury estimates suggest that higher levies might harm public finances. HM Revenue and Customs calculated last year that raising the higher rate by 10% would decrease Treasury receipts by £3.6 billion in 2028–29. Healey has also ruled out equalising capital gains rates with income tax, despite previous calls from some party figures to do so.
Cabinet ministers had previously voiced support for reforming the levy. Louise Haigh, prior to becoming Andy Burnham's first secretary of state, suggested aligning capital gains closer to income tax. Defence Secretary Wes Streeting had called for an effective wealth tax earlier this year. However, Burnham's former adviser and Goldman Sachs chief economist Lord Jim O'Neill cautioned that lifting the tax would send the wrong message to business.
Healey underscored his approach to business earnings during a speech last month, saying he wants the country to focus on wealth creation. "I want our government decisions and policies to raise the levels of confidence, and investment, and profit in British business," the chancellor said.
While Capital Gains Tax is expected to remain unchanged, senior banking executives told the BBC they anticipate Healey may raise taxes on banks following bumper profits. Meanwhile, Conservative leader Kemi Badenoch is set to call on the government to curb borrowing and enact £70 billion in cuts to welfare and overseas aid.
Source: BBC Business.
Questions and answers
- What is Capital Gains Tax and what are the current UK rates?
- Capital Gains Tax is charged on profits from selling assets like shares or secondary properties. UK basic-rate income taxpayers pay 18%, while higher and additional-rate payers pay 24%.
- Why is the chancellor not raising Capital Gains Tax?
- The government received warnings that higher rates could lead wealthy individuals to leave the country or defer selling assets, potentially reducing overall tax receipts.
- Which taxes might still go up in the Budget?
- Senior banking executives told the BBC they expect the chancellor to increase taxes on the banking sector following bumper profits.
