The government is reportedly exploring an increase in capital gains tax (CGT) rates, with Prime Minister Andy Burnham and Chancellor John Healey understood to be considering a rise to as high as 45%. This potential change aims to fund a proposed £3,000 increase in the tax-free personal allowance, moving it from £12,570 to £15,570.
The proposal is outlined in a Budget submission from Labour donor and green energy entrepreneur Dale Vince, as reported by The Telegraph. Modelling by the National Institute of Economic and Social Research (NIESR), commissioned by Vince, suggests that a £3,000 increase in the personal allowance could benefit the lowest fifth of earners by £600 annually. This initiative would reportedly cost the Treasury £20 billion, which could be offset by higher CGT rates and ending interest payments on Bank of England reserves.
Currently, basic rate taxpayers pay CGT at 18%, while higher and additional rate taxpayers pay 24%. The annual CGT allowance is £3,000. The Treasury and No.10 are reportedly considering these proposals ahead of the Autumn Budget next month. A Treasury spokesperson stated that tax decisions are a matter for the Chancellor to announce at fiscal events, rather than commenting on speculation.