Prime Minister hopeful Andy Burnham is reportedly considering a major overhaul of Capital Gains Tax (CGT) if he takes office. CGT is a tax on the profit earned from selling or disposing of assets that have appreciated, including second properties and valuable collectibles.
One potential change involves aligning CGT rates with income tax bands, following calls from Burnham’s advisor, Louise Haigh MP, for a review. Currently, income tax is charged at three rates: 20%, 40%, and 45%. In contrast, CGT rates stand at 18% for basic rate taxpayers and 24% for higher-rate taxpayers.
Recent hikes under Chancellor Rachel Reeves raised CGT from 10% and 20% to the current levels as of the October 2024 Budget. Prior to that, Jeremy Hunt reduced the annual CGT allowance dramatically, from £12,300 to just £3,000.
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Burnham’s move to equalize CGT with income tax rates aims to create fairer treatment between earned income and investment profits. This change would also close loopholes that allow business owners and executives to receive income via company shares taxed at lower rates.
Consultancy Grant Thornton notes that while speculation around matching CGT to income tax rates has persisted for years, recent governments have only made modest adjustments. Bringing CGT rates up to 20%, 40%, or 45% depending on income is a significant shift.
Wes Streeting, a contender for Chancellor, has publicly supported such reforms, with safeguards for genuine entrepreneurship and reinvestment.
Burnham has pledged to maintain the 2024 Labour manifesto commitments not to raise income tax, VAT, or National Insurance rates throughout the current Parliament. Combined with promises to adhere to fiscal rules on borrowing, this suggests any tax changes will need to be carefully balanced with spending decisions.
While detailed plans remain under wraps, hints toward taxing assets, land, and capital gains suggest these will be key areas for a Burnham-led administration. More concrete proposals are expected in the upcoming Budget, but speculation is set to intensify over the summer.