UK will not raise capital gains tax to same level as income tax, FT reports

UK Rules Out Raising Capital Gains Tax to Income Tax Levels, FT Reports

Government Position and Budget Implications

Finance Minister's Stance on Capital Gains Tax

LONDON, Oct 13 (Reuters) - British finance minister John Healey will not raise capital gains tax to the same level as income tax, the FT reported on Tuesday citing four sources, following speculation that a policy change could be announced at the government budget on October 28.

Pressure to Raise Revenue

Offsetting Borrowing Costs and Funding Initiatives

Healey is under pressure to raise billions of pounds in tax at his first budget to offset higher borrowing costs and fund Prime Minister Andy Burnham's plans for more defence spending and expanded social care.

Potential Changes to Capital Gains Tax

Current Tax Rates and Possible Adjustments

The FT said Healey could still opt for a smaller increase in capital gains tax, which is currently charged at 18% for basic-rate taxpayers and 24% for higher-rate taxpayers, compared to income tax rates of 20% and 40% paid by basic and higher-rate taxpayers.

Constraints on Tax Policy

Labour Party Manifesto Commitments

The finance minister has been left with limited options after he promised to stick to the Labour Party's 2024 manifesto commitments not to raise the rates of income tax, value-added tax, corporation tax or social security contributions.

Economic Impact of Capital Gains Tax

Revenue Generation and Behavioural Effects

Potential Risks to Treasury Income

Capital gains tax raised £24 billion ($31.8 billion) in the 2025/26 tax year, but economists have warned that raising the rate could change behaviour resulting in a drop in income for the Treasury, as people decide not to sell assets or leave Britain.

Additional Information

Exchange Rate Reference

($1 = 0.7556 pounds)

Reporting Credits

(Reporting by Sarah Young; Editing by Kate Holton and James Davey)