Reeves evades question on Capital Gains Tax

In an interview with Bloomberg, Chancellor Rachel Reeves failed to rule out raising Capital Gains Tax in her October 30^th budget.

‘It’s always important … to strike the right balance. … I won’t do anything that makes it harder to achieve economic growth and prosperity.’

This marks a clear change in Labour's attitude to Capital Gains Tax. Before the general election, both Reeves and now Prime Minister Sir Keir Starmer said there were no plans to increase Capital Gains Tax. However, last week Reeves announced that the Autumn budget would see tax rises to compensate for the £21.9 billion overspend left by the previous government.

Speculation as to where the increases will occur has been rife. Reeves has promised to honour Labour’s pledge not to raise taxes for working people, by ruling out any increase to income tax, national insurance payments or VAT (value added tax).

Capital Gains Tax is paid on profits made from selling assets that increase in value, such as property or shares. Current estimates from the Office for Budget Responsibility predict the UK will raise £15.2 billion from the tax in this financial year. Business groups have raised concerns that raising the tax could damage economic growth as it would have ramifications for small businesses. Tina McKenzie from the Federation of Small Businesses (FBS) stated that ‘investing in a small business is already one of the least tax-efficient things anyone can do with their money’ and raising the tax would only be a further deterrent for potential developers. However, other analysts stress that current rates are significantly lower than income tax rates.

Other suggestions for areas where Reeves can generate more revenue include reducing pension tax relief or raising inheritance tax. However both these measures would be difficult to implement and have limited gains. Inheritance tax is already a controversial topic, with repeated calls for the tax to be abolished. Reeves’ omission is seen as a clear indication that Capital Gains are set to go up, the only question is by how much.

(Sources: bbc.co.uk)