Former Conservative Party Chancellor Sir Jeremy Hunt has warned that a 24% capital gains tax (CGT) rate proposed by Andy Burnham would be 'terrible' for households. Hunt's comments come as Burnham is widely expected to take over as Labour Party leader from Sir Keir Starmer.
Hunt's Warning on Revenue
Hunt stated: 'It would be terrible. And it doesn't matter if you're left or right, don't do it. If you increase your capital gains tax above 24 per cent, you will get less revenue, not more, because investors will change their behaviour.' He added: 'So if you're a left-wing government that wants to raise more money to redistribute it to poorer areas or to put it into public services, don't do this because you'll get less money for the things that you care about.'
Current CGT Rules and Proposed Changes
Capital gains tax is a levy on profits from selling investments or assets, such as second homes or shares. Currently, taxpayers can make up to £3,000 in profit annually before owing tax, with profits above that taxed between 18% and 24%. Burnham's plan would introduce three new tax bands aligned with income tax rates: 20%, 40%, and 45%.
Potential Revenue and Expert Opinions
The Centre for the Analysis of Taxation estimates that aligning CGT with income tax bands could raise £12 billion a year. However, critics argue it would discourage investment. Michael Healy, CEO of IG Consumer, said: 'We would strongly urge the incoming Prime Minister and the next Chancellor to avoid hiking Capital Gains Tax.' Guy Ward-Jackson, a senior analyst at Sir Tony’s institute, warned against giving the UK the highest top capital gains rate in Europe at 45%.
Impact on Entrepreneurs and Investment
Writing in The Telegraph, Ward-Jackson noted: 'While everyone else is racing to attract entrepreneurial talent, we would be punishing them and making ourselves poorer as a result. To be a prosperous country, Britain sorely needs long-term investment and the willingness to back new businesses, technologies and ideas. We must be a place where entrepreneurs feel they can take risks, build companies, and be rewarded for it – all the while contributing to jobs and growth. Increasing capital gains tax to the level of income tax would undermine those incentives and send entirely the wrong signal.'
