Chancellor Rachel Reeves could come under pressure to raise Capital Gains Tax (CGT) thanks to proposals to bring the charge closer to income tax rates. This move could leave savers with investments facing higher tax bills if adopted.
Under new proposals put forward by Louise Haigh, Andy Burnham’s close ally, said CGT should be “brought closer” to income tax rates. Ms Haigh has previously managed Mr Burnham’s Makerfield by-election campaign and is expected to secure a senior Cabinet role. In the publication, Renewal, she argued that these changes should be part of a “fundamental redesign” of the tax system.
Ms Haigh said that by aligning the two tax rates more closely, this would restore confidence in the tax system as the change would ensure those who can structure their income are not favoured over those who earn through employment.
These proposals, released last month, have made a reappearance ahead of Mr Burnham’s first major policy announcement since Sir Keir Starmer’s resignation as Prime Minister.
She wrote: “It would shift the taxation burden away from punishing work, and towards unproductive capital accumulation, which does little to grow the everyday economy”.
Ms Haigh also proposed bringing in inflation indexation, so investors are not taxed on gains caused only by rising prices and advocated for families to face a new capital gains tax charge on inherited estates in hopes to improve fairness between generations.
“At a minimum, reforms should address specific loopholes, such as the capital gains tax uplift at death, which allows unrealised gains to escape taxation entirely,” she added.
Other proposals made by Ms Haigh included replacing stamp duty with a new annual national property and land tax, while reducing council tax for certain homes.
Ms Haigh also urged the Government to relax its fiscal rules. This is with the aim allowing the £27.8 billion National Wealth Fund to borrow against its existing balance sheet, potentially reducing pressure on the Chancellor while increasing investment in clean energy, advanced manufacturing and key infrastructure projects.
Her proposals could also shift more control over public spending from the Treasury to Downing Street.