Labour peer Lord Kinnock has urged Andy Burnham and Chancellor John Healey to launch a Capital Gains Tax (CGT) raid in the October 28 Budget, potentially increasing the tax burden for higher earners by up to 21 percent. The call comes as part of a broader push to align CGT rates with income tax, a move that could generate an additional £12 billion in revenue, according to Lord Kinnock.
CGT and Income Tax: Current Rates and the Proposed Change
Currently, CGT is charged at 18 percent for basic-rate taxpayers and 24 percent for higher and additional-rate taxpayers. In contrast, income tax rates stand at 20 percent, 40 percent, and 45 percent. The proposal would bring CGT in line with these income tax bands, meaning additional-rate taxpayers could see their CGT rate rise from 24 percent to 45 percent—a 21 percentage point increase.
CGT is levied on the profit made when selling, gifting, or disposing of an asset that has increased in value, such as shares, property, or valuable possessions. The tax is applied to the gain, not the total sale price.
Lord Kinnock's Endorsement and Expected Revenue
Lord Kinnock told the i Paper: “I’m sure that the Government understands the utility and the encouragement which the further £12bn revenues that such a fair change in CGT would bring.” His comments add weight to the growing pressure on the Chancellor to act in the upcoming fiscal event.
Former transport secretary Louise Haigh, a close ally of Burnham, has also backed the idea. In an article for the journal Renewal, she wrote that the levy "should be brought closer to income tax rates" to "shift the taxation burden away from punishing work." She added: "This reform is central to restoring confidence that the system does not favour those able to structure their income over those earning through work."
Industry Concerns: Potential Negative Impacts
However, not all experts agree. Jason Hollands, managing director at wealth manager Evelyn Partners, warned that "punitive CGT rates risk becoming self-defeating because investors delay disposals, retain assets they might otherwise sell, restructure their affairs or reduce investment activity altogether." He further cautioned: "If the UK were to move towards rates of 40% or 45% for higher rates of CGT, it would risk becoming significantly less competitive than many comparable European countries. That would discourage investment, entrepreneurship, and the recycling of capital into new businesses and productive opportunities."
Treasury Response: Decisions Reserved for Fiscal Events
A Treasury spokesman said: “The Chancellor is fully focused on his priorities, which will boost business, help with the cost of living and support people in every postcode. 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 proposals made.”
The October 28 Budget is expected to be a key moment for the government to outline its fiscal strategy, and the CGT proposal is likely to be a major talking point in the run-up to the announcement.
