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.
HMRC estimates suggest only a very small increase could raise revenue – lifting the lower rate of CGT by 1% would be forecast to raise just £5 million in 2028-29. But raising the tax significantly, as many around the next Labour leader have proposed, would actually cost money. Official analysis shows a 10 percentage point rise in the higher rate would cost the Treasury £3.6 billion in 2028-29.
The financial services firm IG, using HMRC’s published assumptions, concluded that raising the CGT rate for additional rate payers – those earning above £125,140 a year – from 24% to 45% would cost £4.6 billion, while an increase from 24% to 40% for higher rate payers would cost £3.2 billion. In total, IG estimates that equalising income tax and CGT would cost the Treasury £7.76 billion.
The briefing also warns that increases could drive the small number of people 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, while 32,000 taxpayers, just over 10% of payers, accounted for 80% of gains.
Any increase therefore carries a disproportionate risk of behavioural change among these individuals — delaying transactions, reducing investment, or shifting assets overseas — driving revenue down even further.
Daniel Herring is Head of Economic & Fiscal Policy at the Centre for Policy Studies. He was previously at the Legatum Institute, where he led work on the Institute’s Prosperity Index and began his career at the New Zealand Treasury. He holds degrees in Law and Arts (majoring in Politics and Economics) from the University of Auckland and a Master of Science in Applied Statistics from Birkbeck, University of London.
