Chancellor John Healey has ruled out raising Capital Gains Tax (CGT) in his first Autumn Budget, rejecting calls from some Labour MPs and economists who argued for higher levies on wealth. Healey emphasized a focus on economic growth, stating in a pre-Budget speech that government policies should “lift confidence, investment and profit.”
CGT in the UK is currently 24% for higher-rate taxpayers, compared to income tax rates as high as 45% in England, Wales, and Northern Ireland, and 48% in Scotland. Matching CGT with income tax would have been a ‘nuclear option,’ potentially increasing the top rate to 45% or 48% in England, Wales and Northen Ireland, and 48% in Scotland. However, HMRC projections suggest that raising CGT by 10 percentage points could reduce tax receipts by £3.5 billion by 2028-29 due to behavioral shifts, such as accelerated asset sales.
Comparisons to European Rates
UK CGT rates remain lower than those in several European G7 nations. France imposes a 30% flat rate, Germany 26.375% including surcharges, and Italy 26%. The UK’s 24% rate is ‘marginal’ compared to some peers, with broader tax frameworks complicating direct comparisons. The chancellor’s stance aligns with warnings from figures like Lord Jim O’Neill, a Burnham ally, who argued that CGT hikes could ‘send the wrong message to business’ and further burden an economy already ‘beaten up’ by recent policies.
Fiscal Headroom Reduction
Healey also announced a reduction in the government’s fiscal headroom—from £23bn to £15bn—prioritizing a “steady as she goes” approach over the “huge packages of tax rises” of his predecessor. City AM noted that the chancellor’s focus on growth includes measures to lower hiring costs for under-25s, though details remain unclear. Meanwhile, Conservative leader Kemi Badenoch criticized the decision, accusing Labour of “burying his head in the sand” over rising public spending.
The move leaves CGT rates unchanged at 24% for higher earners, with the next major tax-related date being the 28 October Budget.
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