Wes Streeting has proposed introducing a “wealth tax” by equalising capital gains tax with income tax.
The former health secretary said doing so would create a “wealth tax that works” and would address inequalities in the current system.
Under the proposal, gains would effectively be taxed at 20%, 40% and 45%, depending on a person’s overall income and profits from assets, while loopholes allowing earnings to be structured as capital gains would also be targeted.
However, tax experts warned that the move could backfire for the UK Government.
Maike Currie, VP personal finance at PensionBee, said: “Equalising capital gains tax with income tax would represent a major shift in the UK’s approach to investment, savings and wealth creation and could have serious unintended consequences for the country’s already sluggish economic growth.
“Using higher CGT rates as a lever to raise more revenue for the Government is short-sighted, as such a move would work against the UK in the longer term, jeopardising investment at a time when the UK desperately needs capital flowing into the country, not out. Risking a capital flight and a reduction in the tax base would be a major own-goal.”
Currie said that while the argument for fairness may resonate with some, capital gains are not the same as earned income and are often the result of entrepreneurship, long-term investing, risk-taking and inflationary asset growth.
Currie added: “Penalising investors, landlords and small business owners who reinvest those gains could stifle economic activity and innovation.
“There is also a wider confidence issue. After repeated cuts to allowances, frozen inheritance tax thresholds and plans to bring pensions into IHT from April 2027, savers and retirees already feel the goalposts are constantly moving.
“For many families, wealth is tied up in homes, pensions and businesses rather than spare cash. As leadership hopefuls compete to outbid each other with promises of ‘wealth taxes that work’, they should tread carefully to ensure the great wealth transfer does not slowly become wealth erosion.”
Sarah Coles, head of personal finance at AJ Bell, commented: “The next few months may well pour cold water over any prospective plans of the former health secretary, but should he end up the next resident at Number 10 this would be a massive hike, particularly for higher rate taxpayers.
“Ironically, such a move won’t necessarily raise more tax. At this level, it will likely incentivise people to hoard assets until their death when the capital gain effectively resets to zero. This isn’t necessarily right for their investment strategy. It could also mean fewer assets are passed down to younger family members during their lifetime. Plus, it could cause bottlenecks in the property market if people are sitting on houses for tax purposes.”
Rachael Griffin, tax and financial planning expert at Quilter, shared a similar sentiment.
“Equalising rates at up to 45% for additional rate taxpayers would markedly increase the cost of selling assets such as shares and second homes. At those levels, the incentive to realise gains weakens, raising the risk of a lock‑in effect where investors delay or avoid disposals altogether. It may also entrench a ‘hold until death’ mindset, as investors defer sales to benefit from the capital gains uplift on death, further undermining the tax take.”
Griffin said the change would also create wider consequences for the economy.
“CGT plays an important role in recycling capital, and if higher rates discourage disposals, capital becomes more static. In the housing market this could limit supply and reduce mobility among second home owners and landlords. Across investment markets, it can leave portfolios less aligned to changing conditions.
“From a financial planning perspective, the shift would introduce greater tax friction. The hurdle to sell and reinvest becomes materially higher, increasing the risk of inertia and leaving investors more exposed to concentration risk over time.”
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