Andy Burnham should resist calls to raise Capital Gains Tax amid concerns it would lead to a drop in receipts, according to a new briefing from the Centre for Policy Studies.
While estimates from HM Revenue & Customs suggest a small increase in the tax could raise revenue, with a 1% rise in lower CGT forecast to raise £5 million in 2028-29, raising the tax significantly would cost the Government 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.
Using analysis of HMRC’s published assumptions, IG concluded that increasing the CGT rate for additional rate payers from 24% to 45% would cost £4.6 billion. An increase from 24% to 40% for higher rate payers would cost £3.2 billion.
It comes amid growing speculation that the new Prime Minister will seek to equalise capital gains tax with income tax rates. However, it’s estimated that doing so would cost the Treasury £7.76 billion.
The briefing also warns against increases which could drive the individuals who pay CGT overseas and says any increase in the rate would have a disproportionate risk of behavioural changes such as delaying transactions, reducing investment or shifting investments overseas, driving revenue down further.
Daniel Herring, head of economic and fiscal policy at CPS, 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.
‘Those around Andy Burnham 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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