Chancellor rejects calls to raise Capital Gains Tax in Budget
Influential Labour figures had been pushing for equalising CGT and income tax, but critics have said this could drive wealthy people out of Britain.
Chancellor John Healey has dismissed calls from some Labour MPs to increase Capital Gains Tax (CGT).
Cabinet ministers Wes Streeting and Louise Haigh both previously voiced support for raising CGT before Andy Burnham became prime minister in July.
Ahead of next week's Budget, as first reported by the Times, external, Healey is minded not to increase CGT - which is imposed on the profit people make when they sell an asset that has increased in value, such as shares in a company or properties which are not primary residences.
The move followed warnings that it could end up costing the government money if wealthy people leave the country or defer selling off assets.
If you pay income tax at the basic rate then CGT is charged at 18%. For higher and additional rate income tax payers, the CGT rate is 24%.
Last year, HMRC estimated, external that lifting the lower rate of CGT by 1% could raise £5m by 2028-9 but increasing the higher rate of CGT by 10% would reduce the Treasury's receipts by £3.6bn in 2028-9.
The amount raised could be reduced if people adapt their behaviour to the tax rise, for example by moving abroad or deciding not to sell a property.
The chancellor gave an indication of his approach last month in a speech when he spoke about the importance of businesses and self-employed people making profits.
"I want to see this country as a country of wealth creation. I want our government decisions and policies to raise the levels of confidence, and investment, and profit in British business," Healey said.
Burnham has faced warnings against lifting CGT. His former adviser and Goldman Sachs Chief Economist Lord Jim O'Neill suggested it would send "the wrong message to business".
But influential Labour figures had pushed for equalising CGT and income tax, with the former generally attracting a lower tax rate.
Louise Haigh, a key ally of the prime minister, had suggested capital gains should go up to be closer to income tax, before she became Burnham's first secretary of state.
In an article for the Renewal journal,, external Haigh argued that raising CGT would "shift the taxation burden away from punishing work, and towards unproductive capital accumulation which does little to grow the everyday economy".
She said this could be accompanied by measures to ensure that "genuine investment returns are not penalised".
Defence Secretary Wes Streeting called for a "wealth tax that works" in May, shortly after resigning as a minister in former Prime Minister Sir Keir Starmer's government.
He had argued that equalising CGT with income tax would address an unfair system that was "penalising work".
Healey had already ruled out levelling the two tax rates, according to a report in the Financial Times last week, external.
Asked about the government's plans for CGT on BBC Breakfast, Communities Secretary Angela Rayner would not speculate on the Budget.
Pressed over whether rejecting calls to increase the tax was a win for the rich, she said the government had already taken steps to give people "breathing space" and help with the cost of living.
It comes after senior banking executives told the BBC they expect Healey to raise taxes on the sector. UK banks have been reporting bumper profits, leading to calls from unions for higher taxes.
Healey is due to set out his tax and spending plans at his first Budget on 28 October, against the backdrop of the US-Iran war which has led to rising prices.
The chancellor is under pressure to find measures to ease the cost of living and fund an increase for defence at his spending review next year.
The chancellor's options for raising money are limited as Labour's 2024 manifesto pledged not to increase income tax, National Insurance and VAT, the three big revenue raisers.
The government is also restricted in how much it can borrow due to its self-imposed rules on debt.
In a pre-Budget speech on Tuesday, Conservative leader Kemi Badenoch urged the government to cut spending and reduce its borrowing.
She said the prime minister and the chancellor should "live within our means" and pointed to her party's plan to save £70bn in cuts, including to welfare and overseas development aid.
Badenoch told an audience in central London that Labour would not "find the courage" to cut spending.
She said the chancellor wanted to deliver a "nothing to see here Budget" but added: "Britain cannot afford to do as little as possible."
The Liberal Democrats have said the government could raise £14bn partly by introducing a windfall tax on the profits of banks.
