Chancellor John Healey has decided against raising Capital Gains Tax in next week's Budget, dismissing calls from some Labour MPs to increase the levy on profits from asset sales.
Treasury sources confirmed Healey's position ahead of the announcement. The decision follows warnings that higher CGT could prompt wealthy investors to leave the UK or delay selling assets, potentially reducing tax revenue rather than increasing it.
Cabinet ministers Wes Streeting and Louise Haigh had previously supported raising CGT before Andy Burnham became prime minister in July. Haigh, now secretary of state, had suggested bringing capital gains tax closer to income tax rates, which are generally higher. Streeting, now defence secretary, called for a "wealth tax that works" in May after resigning from the former government.
Influential Labour figures had pushed for equalising the two tax rates, arguing the disparity favored wealthy asset owners. But Healey has already ruled out levelling CGT and income tax, according to the Financial Times.
Healey cited concerns about investor confidence. Lord Jim O'Neill, a former Treasury adviser and Goldman Sachs Chief Economist, warned that raising CGT would send "the wrong message to business." The chancellor has previously stated he wanted the UK to be "a country of wealth creation" with policies that lift confidence, investment and profit.
The decision reflects a tension within the Labour government between calls for wealth redistribution and concerns about capital flight. While some party figures argue higher capital gains taxes would address inequality, the Treasury's assessment prioritizes retention of wealthy investors and their assets.
The Budget announcement comes as other tax changes loom. Banks expect to face higher levies, and Conservative leader Kemi Badenoch is expected to urge the government to drop spending plans and reduce borrowing in a pre-Budget speech Tuesday.