The Chancellor, John Healey, has reportedly ruled out raising capital gains tax at next week’s Budget, according to the Financial Times and The Times.
Healey delivers his first Budget under prime minister Andy Burnham on 28 October. The Treasury did not confirm the reports.
“As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals,” a Treasury spokesman said.
The tax applies to profits from selling assets including buy-to-let properties, second homes and other investment property. Higher-rate taxpayers currently pay 24% on taxable residential property gains, while basic-rate taxpayers generally pay 18%, depending on income and the size of the gain. The additional rate of income tax is 45% in England, Wales and Northern Ireland. The reported decision does not rule out other property-related tax changes at the Budget.
Officials reportedly believe higher rates could lead investors to delay sales or leave the UK, which would reduce taxable transactions and government revenue. HMRC previously estimated that raising the higher rate by 10 percentage points could cut receipts by £3.6bn in 2028-29, a figure that reflects expected changes in taxpayer behaviour.
Healey had already dismissed proposals to align capital gains tax with income tax, and Lord O’Neill of Gately, a former Goldman Sachs chief economist who has advised Burnham, opposed an increase.
Several Labour figures had argued for a rise. Louise Haigh, the first secretary of state, and Wes Streeting, the defence secretary, both backed an increase before Burnham became prime minister, with supporters arguing it would narrow the gap between tax on investment gains and on earnings. Caitlin Boswell, deputy director at Tax Justice UK, criticised the reported decision as a missed opportunity.
The biggest revenue-raising measure reportedly planned is a higher rate on bank profits, expected to fund cost-of-living support for households and businesses. The chancellor stressed the importance of business profits in a speech last month.
“I want to see this country as a country of wealth creation,” he noted. “I want our government decisions and policies to raise the levels of confidence, and investment, and profit in British business.”
Investment firms also commented on the reports
“Investing for the long term requires confidence that you understand the rules you’re investing under,” said Michael Healy, chief executive of IG Consumer. “But over the past decade, investors have faced repeated changes to investment taxes and rules. It’s not just changes that come into force that create uncertainty - investors also have to navigate proposals that are subsequently changed or dropped, let alone those leaked ahead of Budgets.
“Reports that the Chancellor has ruled out raising CGT are welcome and would send a much-needed positive signal to investors. The Government must now build on this by committing to a stable investment tax regime that gives more people the confidence to invest for the long term. This is also one of the best ways the Government can reduce reliance on the state and strengthen the UK’s fiscal position.”
“Chancellor John Healey ruling out a further increase to capital gains tax (CGT) will provide some reassurance to business owners and investors ahead of the Autumn Budget,” notes Rob Morgan, chief investment analyst at Charles Stanley Direct, part of Raymond James. “The decision suggests the Treasury is increasingly focused on the risks of behavioural change rather than just the headline rate. Higher CGT rates can encourage investors to delay asset sales, potentially reducing the amount of tax ultimately collected.
“It also reflects broader concerns about economic competitiveness. At a time when the government is trying to encourage investment and growth, another rise in CGT could send the wrong message to entrepreneurs, business owners and investors.
“There are also lessons from the recent non-dom reforms too. Potential concerns that wealthy and internationally mobile individuals may relocate have highlighted the need to consider behavioural responses alongside expected tax revenues. Against that backdrop, stability in the CGT regime may be seen as a more effective approach than further rate increases.”
Chris Mason, Chief Operating Officer at The Letting Partnership, commented, "The Chancellor's decision not to pursue an increase in Capital Gains Tax will come as a welcome relief to landlords, particularly those who have seen the value of their investment properties increase substantially over the last decade.
"Aligning CGT with income tax rates could have added more than £15,600 to the tax bill of an additional-rate taxpayer selling an average property. At a time when landlords are already facing considerable financial and regulatory pressures, avoiding such a significant increase is undoubtedly a positive outcome.
"However, while this particular threat appears to have been taken off the table, the wider challenges facing the private rented sector remain. Landlords are still adjusting to the substantial changes introduced under the Renters' Rights Act, with further regulatory requirements and tax changes yet to come.
"The Government must recognise that it is the cumulative impact of these changes that risks undermining landlord confidence. While improving standards across the rental sector is important, so too is ensuring that property investment remains financially viable.
"The decision to reject calls to raise CGT is a welcome step in the right direction, but landlords need more than the avoidance of further tax increases. They need a stable and supportive environment that gives them the confidence to remain in the sector and continue providing much-needed rental homes."
