Chancellor John Healey has rejected calls by senior Labour figures to raise capital gains tax (CGT) to the same level as income tax, according to the Financial Times, giving some reassurance to overseas investors and property owners who had been bracing for a sharp CGT rise ahead of the October 28 Budget. Four people close to the matter told the FT the Treasury has no intention of equalising the two taxes — one called the idea “batshit crazy” — with officials arguing that matching the rates could push wealthy individuals to leave the UK or delay asset sales, cutting rather than raising Treasury receipts. CGT is currently charged at 24 per cent for higher-rate taxpayers on profits from asset sales, against income tax rates of up to 45 per cent.
The push for equalisation came from allies of Prime Minister Andy Burnham: first secretary of state Louise Haigh had called for CGT to be “brought closer to income tax rates,” while Lord Neil Kinnock and defence secretary Wes Streeting proposed full equalisation. Labour donor Dale Vince backed estimates that the move would raise £14bn for the Treasury, and the left-leaning IPPR think-tank called it a “no-brainer.” Those interventions unsettled entrepreneurs, tech founders and tax advisers; business leaders told ministers at recent meetings that more wealthy individuals would quit Britain if CGT rose sharply. Healey is under pressure to raise revenue in the Budget after the Institute for Fiscal Studies warned on October 11 that he faces a £35bn hole in the government’s spending plans.
Ruling out full equalisation does not rule out every change. The Treasury could still pursue a smaller increase in CGT, and is separately working on relief proposals aimed at entrepreneurs who sell their businesses and reinvest the proceeds in the UK — a response to lobbying from groups including Tech Nation, Startup Coalition and Enterprise Britain for CGT obligations to be reduced or deferred when sale proceeds go back into British start-ups and scale-ups within a set window. Sir Jeremy Hunt, the former Conservative chancellor, told the FT that equalisation “was always a non-starter,” adding that officials are briefed that 24 per cent is roughly the revenue-maximising rate for CGT, beyond which receipts start to fall. Lord Jim O’Neill, who advised Burnham before declining to join the government, said a CGT rise would “pour more fuel” on the idea that wealthy people are planning to leave the UK; Hargreaves Lansdown’s chief executive also urged the government against raising the tax. The Treasury declined to comment.
References
Financial Times – Healey rejects calls to equalise capital gains and income tax rates / Traders Union – UK Treasury rules out equalising capital gains tax with income tax / GuruFocus – UK Chancellor Rejects Capital Gains Tax Hike Amid Investor Concerns / MarketScreener – UK will not raise capital gains tax to same level as income tax, FT reports
