Government 'considering raising capital gains tax as high as 39%' in Budget
10 October 2024, 15:40 | Updated: 14 October 2024, 07:56
Labour is said to be considering raising capital gains tax in the Autumn Budget.
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Models developed by the Treasury are testing a higher range of between 33% and 39% for the tax, which is paid on the profits made from the sale of assets, the Guardian reported.
Capital gains tax currently stands at between 20% and 28% for higher-rate taxpayers.
A Treasury spokesperson told LBC that any reporting on specific tax changes was "pure speculation".
Some people on the left have advocated for raising capital gains tax, as it would mostly affect wealthier people who they believe are better able to bear a higher tax burden.
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Others have argued that increasing capital gains tax risks driving wealthy people - who already pay higher taxes - out of the country, potentially lowering the tax take overall.
The government have warned of a £22 billion black hole in the public finances ahead of the first Budget later this month.
Meanwhile the Institute for Fiscal Studies (IFS) think tank warned that Chancellor Rachel Reeves may need to raise £25 billion in taxes to keep up spending on public services without increasing borrowing.
Labour have promised not to raise income tax and corporation tax or to increase National Insurance or VAT - meaning that finding any tax rises may be difficult.
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The IFS report, done with investment bank Citi, found that if the government does not make cuts to spending outside of public services, she would need a tax rise of £16 billion to remain on course to balance the budget in 2028-29.
This would come in addition to the £9 billion tax rise from measures set out in Labour's manifesto - adding up to about £25 billion overall.
Currently, higher-rate taxpayers pay 24% capital gains tax on profits from sales of property that is not their main home, 28% on gains from ‘carried interest’ from managing an investment fund and 20% on gains from other chargeable assets.
The IFS said that the government "should seek to make [CGT] reform credibly lasting.
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"It should set out clear principles and a rationale for reform and commit to the new regime for the length of the parliament. Instability and unpredictability are bad for investment."
According to the Treasury paper seen by the Guardian, raising capital gains tax to 33%, the low end of the modelled range, would raise several hundred million pounds. Increasing the rate to the middle of the range could raise around £1.5 billion. But hiking it to 39% could see the overall tax take fall after five years.
