‘War on wealth creation’: capital gains tax raid would lose government money, Tories argue
A fresh capital gains tax raid on Britain’s wealthiest would ultimately lose the government money, according to new Conservative analysis of Treasury data. Internal government modelling suggests that the top rate of capital gains tax (CGT) is already too high and hiking it further would lead to lower tax receipts. Figures presented to the Labour [...]
Conservative analysis refutes claim that raising capital gains tax would bring in more revenue for the government. Government modeling indicates that the current top rate of CGT is excessive and increasing it would result in less tax collected. Data presented to the Labour government ahead of its inaugural Autumn Budget in 2024 revealed that the Treasury anticipates lower income from investors, businesses, and landlords as tax rates rise.
The Conservatives believe the point of no return is when CGT is levied at 22 percent. Officials estimate that capital gains taxable amounts would decrease by 3.6 percent for every 1 percent increase in take-home earnings from assets. Shadow Chancellor Mel Stride commented on X, stating: "This demonstrates precisely what happens when taxes are raised and investors live in fear."
Despite HMRC's predictions that raising capital gains tax would cost the Treasury money, Labour ministers and think tanks continue advocating for the tax hike. One reason for the tax increase may be ideological opposition to wealth generation. The current CGT rates are 18 percent for basic rate taxpayers and 24 percent for higher and additional-rate taxpayers, following Rachel Reeves' increase from 20 percent.
Record capital gains tax revenue of £127 billion was recorded in the 2024/25 tax year, an 82 percent increase compared to the previous year, according to the Institute of Public Policy Research. Labour's future Chancellor, John Healey, is under pressure to raise CGT further. Louise Haigh, an ally of Prime Minister Andy Burnham, has backed proposals to increase CGT, but Burnham has ruled out taxing wealth out of the country.
This has raised concerns about the government reaching 'peak tax' and potentially losing money by overburdening households and businesses. Simon French, chief economist at Panmure Liberum, said, "The behavioral effects of CGT policy dynamics are more significant than any other tax." The latest data undermines the notion of a recurring tax revenue source.
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