John Healey has squashed speculation he will raise capital gains tax in the forthcoming Budget after reportedly rejecting calls from his cabinet colleagues.
The Treasury was facing lobbying efforts from top ministers, including Louise Haigh and Wes Streeting, to raise the capital gains tax (CGT) rate from its current level of 24 per cent for higher rate taxpayers.
But Healey has opted to reject those calls following concerns it would drive more higher earners to ditch the UK, according to Treasury sources.
The government has faced fresh warnings over lifting CGT in the last week with former adviser to Prime Minister Andy Burnham and Goldman Sachs chief economist Lord Jim O’Neill stating it would send “the wrong message to business”.
Burnham himself has said the government must be “conscious of the extent to which Labour has raised revenue” in previous Budgets, which have put up taxes by £70bn.
CGT is charged at a rate of 18 per cent on basic rate taxpayers and 24 per cent on a higher rate. It is levied on the increased value of investments when they are sold.
Healey left with few revenue-raisers
The Treasury had rejected prior calls to equalise CGT bands with income tax, where the base rate is 20 per cent and higher 40 per cent. The decision to rule out any increase was first reported by The Times.
The decision leaves Healey with fewer revenue-raising options when he takes to the despatch box on 28 October, following his commitment to the Labour manifesto to not raise VAT, national insurance or income tax.
One decision that appears pencilled in is a tax raid on the country’s top banks, which is expected to fund a cost-of-living package.
The Chancellor has faced fierce lobbying from the left of the Labour party and trade unions to slap higher taxes on the sector following the bumper profits reaped by industry this year.
The simplest lever available to Healey would be an increase to the banking surcharge that sits on top of corporation tax. The surcharge stands at three per cent after being reduced from eight per cent under Jeremy Hunt’s Chancellorship in 2023. A reversal of that move is understood to be under discussion, which would raise around £2bn a year.
A Treasury spokesperson said: “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 rumour, speculation or proposals.”