- Many in the Labour Party, including those close to Andy Burnham, are calling for the next Prime Minister to raise capital gains tax, and even to equalise it with income tax
- But the Government’s own analysis shows that raising CGT further would cost money, rather than raising it
- Hiking the higher rate of CGT by 10 points, according to official estimates, would lower revenue by £3.6 billion after three years.
- CGT is also overwhelmingly paid by a very few people: just 32,000 taxpayers account for 80% of CGT payments. This means that it is particularly vulnerable to those people deciding to leave the country
- Even if the Treasury’s estimates are wrong, CGT is a relatively minor tax – raising just £24 billion, or 2% of all revenue – so there is little prospect of generating enough revenue from it to fill the holes in the Government’s balance sheet
Andy Burnham should resist calls from those close to him to raise Capital Gains Tax (CGT), which HMRC figures show would cause receipts to fall, according to a new briefing from the Centre for Policy Studies.
While HMRC estimates suggest a small increase in the tax could raise revenue – raising the lower rate of CGT by 1% would be forecast to raise £5 million in 2028-29 – raising the tax significantly, as many around the next Labour leader have proposed, would actually cost money.
Official analysis shows that a large rise in CGT of around 10 percentage points would cost the Treasury £3.6 billion in 2028-29. IG, using analysis of HMRC’s published assumptions, concluded that increasing the CGT rate for additional rate payers – those whose income exceeds £125,140 a year – from 24% to 45% would cost £4.6 billion. An increase from 24% to 40% for higher rate payers would cost £3.2 billion. In total, they estimate that equalising income tax and CGT would cost the Treasury £7.76 billion.
The briefing also warns against increases which could drive the individuals who pay CGT overseas. Unlike income tax, National Insurance, or VAT, CGT has a very narrow base. The most recent figures show just 5,000 taxpayers – fewer than 2% of those who paid any CGT – accounted for half of the total paid. Just over 10% of those paying CGT, 32,000 taxpayers, accounted for 80% of gains.
Any increase in the CGT rate therefore has a disproportionate risk of behavioural changes among these individuals such as delaying transactions, reducing investment or shifting investments overseas, driving revenue down even further.
Daniel Herring, CPS Head of Economic and Fiscal Policy and report author, said:
‘The reasons for staying in the UK for investors, entrepreneurs and job creators are already dwindling thanks to the tax changes brought in under Keir Starmer.
‘Andy Burnham is going to be Prime Minister in just a few short days and those around him will push him to raise CGT – it is vital he does not. It punishes the kind of productive investment the country needs to grow, those most likely to pay it can and will leave the country, and the Government’s own figures suggest that raising it would lower receipts.’
ENDS
NOTES TO EDITORS
- Daniel Herring is Head of Economic and Fiscal Policy at the Centre for Policy Studies
- ‘Why Raising Capital Gains Tax Won’t Work’ is available here
- For more information or interview requests, please contact Emma Revell on emma@cps.org.uk or 07931 698246
- The Centre for Policy Studies is one of the oldest and most influential think tanks in Westminster. With a focus on taxation, economic growth, housing, immigration, and energy abundance, its goal is to develop policies that widen enterprise, ownership and opportunity
Date Added: Thursday 16th July 2026
