Think tank warns Burnham against CGT changes

Andy Burnham should resist calls to raise capital gains tax (CGT) when he becomes Prime Minister, as HMRC figures show this would result in reduced receipts from the tax, according to the Centre for Policy Studies (CPS).

The think tank noted that while HMRC estimates suggested that raising the lower rate of CGT by 1 per cent would raise £5m in 2028/29, raising the tax by a larger amount, as proposed by some in the Labour Party, would actually cost money.

A 10 percentage point increase in CGT would cost the Treasury £3.6bn in 2028/29, according to official analysis.

Equalising CGT with income tax has been touted as a potential policy change, however modelling from IG estimated this would cost the government around £7.8bn annually.

In its briefing, CPS also warned against increases that could result in those paying CGT moving away from the country.

It highlighted that, unlike income tax, National Insurance and VAT, CGT had a very narrow base.

The most recent data showed that just 5,000 taxpayers accounted for half the total CGT receipts, while just over 10 per cent accounted for 80 per cent of the total paid.

CPS warned that any increase in the CGT rate would therefore have a disproportionate risk of behavioural changes among these individuals, who could look to delay transactions, reduce investment or move investments overseas.

“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,” said CPS head of economic and fiscal policy, and report author, Daniel Herring.

“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.”

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