UK Chancellor Healey Rules Out Capital Gains Tax Rise

UK Chancellor John Healey has ruled out a capital gains tax rise in the 28 October budget, ending weeks of speculation about one of Labour's most contentious revenue-raising options. Despite calls from cabinet colleagues including Louise Haigh and Wes Streeting, Treasury sources said an increase could ultimately cost the government money if wealthy individuals defer asset sales or move assets out of the country. The decision, first reported by The Times and confirmed by BBC News, signals that Healey will prioritise wealth creation and business confidence in his first budget.

Why Healey rejected a capital gains tax rise

Capital gains tax is currently charged at 18% for basic-rate taxpayers and 24% for higher and additional-rate payers on most assets. HMRC modelling cited by the BBC estimates that a 10 percentage point increase in the higher rate could actually reduce Treasury receipts by £3.6 billion by 2028-29, because investors may relocate or delay selling assets. This behavioural response was central to Healey's decision, according to Treasury sources. "My priority is wealth creation and business confidence," Healey said, according to the BBC. The Chancellor's stance on UK capital gains tax rates has been shaped by warnings that aggressive taxation of investment gains could backfire.

Cabinet divisions over tax policy

The decision follows open disagreement within the Labour cabinet. Health Secretary Wes Streeting and Transport Secretary Louise Haigh had backed closer alignment of CGT with income tax, arguing that wealth should bear a fairer share. Lord Jim O'Neill, a former Treasury minister, warned that a rise would send "the wrong message to business". The debate reflects broader tensions in Labour tax policy debate over how to fund public services without harming growth. Healey's refusal to raise CGT limits his revenue-raising options, given Labour's manifesto pledge not to increase income tax, National Insurance or VAT.

What the budget will do instead

With CGT off the table, the budget's main revenue-raising measure will instead be a new levy on banks, with proceeds funding a targeted, temporary cost-of-living support package, according to Traders Union. CGT is projected to raise £24 billion in 2025/26, up from previous forecasts due to higher asset prices. Healey faces pressure to raise billions to offset higher borrowing costs and fund Prime Minister Andy Burnham's defence spending and social care plans. The Chancellor has signalled that UK bank levy proposals will be a key part of his fiscal strategy, alongside spending restraint.

Capital gains tax rates at a glance

Following changes announced in the Autumn Budget 2024, the main CGT rates are as follows:

These rates were set out by GOV.UK and remain unchanged in the 28 October budget. The decision not to raise CGT comes after significant capital gains tax changes 2024 that already increased the burden on investors.

Impact and expert perspectives

Economists and tax advisers broadly welcomed the decision, arguing that stability in CGT is crucial for investment. However, some on the left of the Labour Party argue that leaving CGT unchanged while cutting spending or raising other taxes will hit lower-income households harder. The Treasury declined to comment on specific tax decisions before the budget, but a source familiar with the discussions told Reuters that "an increase could ultimately cost the Treasury if wealthy individuals defer asset sales or move assets out of the country." This concern about wealth taxes in the UK is not new, but it has gained urgency as the government seeks to balance growth and fiscal responsibility.

FAQ: Capital gains tax and the 28 October budget

What did John Healey announce about capital gains tax?

Chancellor John Healey ruled out any increase in capital gains tax in the 28 October budget, keeping rates at 18% and 24% for most assets.

Why did Healey reject a CGT rise?

Treasury modelling suggested a higher CGT rate could reduce revenue by £3.6 billion by 2028-29, because wealthy individuals might delay asset sales or move abroad.

What are the current UK capital gains tax rates?

Basic-rate taxpayers pay 18% and higher-rate taxpayers pay 24% on most assets. Residential property is taxed at 18% or 24%, depending on the taxpayer's income band.

Who wanted a capital gains tax increase?

Cabinet ministers Louise Haigh and Wes Streeting backed aligning CGT more closely with income tax, while Lord Jim O'Neill warned against it.

How will the budget raise revenue instead?

The budget is expected to introduce a new bank levy to fund a temporary cost-of-living support package, alongside other spending measures.

Conclusion

Healey's decision to rule out a CGT rise is a defining moment in his first budget, prioritising investment and business confidence over short-term revenue gains. The 28 October statement will reveal whether the new bank levy and other measures are enough to meet fiscal targets while satisfying Labour's competing demands. As the Chancellor finalises his plans, all eyes remain on HMRC tax revenue forecasts and the market's reaction.