Chancellor John Healey rules out capital gains tax rise in 28 October Budget

A decision confirmed on Monday night

Chancellor John Healey will leave capital gains tax rates unchanged in his first Budget, which is due on Wednesday 28 October. Senior government figures confirmed the decision on Monday night, 19 October, after The Times first reported it. Healey had already ruled out bringing CGT level with income tax, a step the Financial Times said he had rejected the previous week. He has promised a steady Budget, mindful of the backlash that followed some tax rises introduced by his predecessor Rachel Reeves.

Pressure from Labour figures

Several prominent Labour voices had pushed for a rise, arguing that gains from selling assets should be taxed closer to earnings. Louise Haigh had suggested capital gains should go up before she became first secretary of state under Andy Burnham. Defence secretary Wes Streeting called for a "wealth tax that works" in May, shortly after resigning as a minister in Keir Starmer's government. Burnham became prime minister in July. The FT also named Dale Vince, a Labour donor, former Labour leader Lord Neil Kinnock and the IPPR think tank among recent advocates of a higher rate.

Business warnings and the revenue question

Business leaders warned that a rise could damage confidence and prompt entrepreneurs to leave the country. Treasury officials argued that wealthy people would change their behaviour by leaving the UK or delaying asset sales, which would reduce receipts. The Treasury rule of thumb puts the revenue-maximising CGT rate at 24%, above which the exchequer would lose money. HMRC estimated in 2025 that raising the higher rate by 10 percentage points would cut receipts by £3.6bn in 2028-29, partly because of behavioural effects. Lord Jim O'Neill, a former adviser to Burnham, put the business case plainly:

“raising capital gains tax would send very much the wrong message to business”

Fiscal squeeze and current tax rates

Healey's room for manoeuvre is tighter than before. The FT estimates that the Iran war has opened a hole of near £12bn in Britain's public finances, and higher borrowing costs and rising inflation have probably trimmed the £23.6bn of fiscal headroom forecast earlier. Reports last week pointed to a higher rate on bank profits as the largest revenue measure in the Budget, money that would go toward cost-of-living support. Under current rules, higher-rate taxpayers pay 24% on gains from asset sales, against up to 45% on income, while basic-rate payers pay 18% on gains and 20% on income.

Capital gains tax18%

Income tax20%

Capital gains tax

18 %

Income tax

20 %

Data from the article text

Opposition and public mood

Conservative leader Kemi Badenoch will use a pre-Budget speech on Tuesday 20 October to press the government to cut spending and borrow less. She will point to a £70bn package of spending cuts, including to welfare and the civil service headcount, as a starting point. She will press Burnham and Healey to live within their means. Ipsos polling of 1,077 Britons carried out between 9 and 12 October found that 67% think Healey is doing neither a good nor a bad job. The same survey found that 65% of the public expects some form of tax rise at the Budget.

Expect some tax rise at Budget65%

Say Healey doing neither good nor bad job67%

Expect some tax rise at Budget

65 %

Say Healey doing neither good nor bad job

67 %

Data from the article text