The United Kingdom government is not planning to raise capital gains tax to the same level as income tax, despite growing pressure on Chancellor John Healey to increase revenue ahead of the October 28 budget.
The decision, reported on Tuesday, October 13, follows concerns that aligning the two tax rates could discourage investment, prompt wealthy individuals to leave Britain and reduce government revenue if investors delay selling their assets.
Capital gains tax applies to profits made when people sell assets such as shares and certain properties. The current rates stand at 18 per cent for basic-rate taxpayers and 24 per cent for higher-rate taxpayers, compared with income tax rates of 20 per cent and 40 per cent for those groups.
Healey faces pressure to raise additional revenue to cover rising government borrowing costs and fund increased defence spending and expanded social care programmes under Prime Minister Andy Burnham.
The government has limited options because Labour’s election manifesto pledged not to increase the main rates of income tax, value-added tax, corporation tax or social security contributions.
Although matching capital gains tax with income tax has attracted support from some Labour figures, business leaders and tax advisers have warned that a sharp increase could undermine Britain’s appeal to entrepreneurs and investors.
The Treasury could still consider a smaller increase or introduce tax reliefs to encourage business owners to reinvest proceeds from company sales into British start-ups.
The decision highlights the government’s challenge of raising revenue while maintaining investor confidence and supporting economic growth.
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