Labour’s Chief Secretary to the Treasury, Rachel Healey, and Greater Manchester Mayor Andy Burnham have been cautioned that any attempt to raise capital gains tax (CGT) in the forthcoming Budget will likely falter. Recent data shows that, despite a modest rise in August, the Treasury’s CGT receipts since April are actually lower than they were at the same point last year, fuelling concerns that higher rates could backfire.
CGT Receipts Decline Amid Budget Speculation
The Office for National Statistics reports that CGT collections reached £198 million in August, up £8 million year‑on‑year. However, when viewed across the whole fiscal period from April, the overall take is down compared with the corresponding period in 2025. Analysts attribute the shortfall to the well‑known volatility of capital‑gains income, which can shift dramatically as investors adjust their timing to minimise liability. The figures have reignited speculation that the Chancellor is considering aligning CGT rates more closely with income‑tax bands, a move that could, on paper, generate additional revenue for the Exchequer.
Expert Warning: Behavioural Sensitivity of Capital Gains Tax
Tax specialists stress that CGT is one of the most behaviourally sensitive taxes in the system. Rachael Griffin, tax expert at Quilter, cautioned: “One of the more persistent Budget rumours is that the government could seek to align Capital Gains Tax rates more closely with income tax rates. On paper, such a move could significantly increase the amount of tax due on investment gains and potentially deliver a sizeable boost to Treasury revenues.“ However, she added, “Capital Gains Tax is one of the most behaviourally sensitive taxes in the system.“ “Monthly receipts can be highly volatile and investors often have considerable control over when gains are realised. Faced with higher rates, some may accelerate disposals ahead of any changes while others may simply hold assets for longer or alter their investment behaviour altogether.“ She concluded, “That means while aligning CGT with income tax rates could appear to raise substantial sums on paper, the eventual tax take would depend heavily on how investors respond. History suggests the reality is rarely as straightforward as the forecasts.“
Sarah Coles, head of personal finance at AJ Bell, highlighted the trend already emerging in the current data. “This is typically a slow month for capital gains tax receipts, but increasingly is a busy one for tax speculation,” she noted. “In August, it’s up – however, overall, since April the Treasury has taken less in CGT than a year earlier.“ She explained, “It’s a useful demonstration of the fact that when it comes to CGT, tightening the screw doesn’t necessarily generate more tax, because people will change their behaviour – they’ll sell up ahead of changes, and then hoard assets for as long as possible afterwards to avoid a hefty tax bill.“ Ms Coles warned that anyone pushing for a rate increase should “bear these latest figures in mind.“
Political Pressure Mounts on Chancellor Over Tax Policy
Both Burnham and Healey have been told that any attempt to raise CGT will “end in failure.“ Their stance reflects a growing consensus among fiscal hawks that the tax is unreliable as a revenue source. Susannah Streeter, chief investment strategist at Wealth Club, offered a possible rationale for the government’s interest: “If the government is looking to put more money into people’s pockets by reducing their income tax bill, it would need to find the money elsewhere, and CGT is increasingly being talked up as a potential source.“ She pointed out that, unlike income tax, CGT can be deferred until assets are sold, giving taxpayers flexibility to timing disposals around the £3,000 personal allowance and the 18 % or 24 % rate bands. This flexibility, however, also makes the tax prone to strategic manipulation.
Future of the Budget: Aligning CGT with Income Tax?
The debate over CGT is set to dominate the pre‑Budget discourse. While the Chancellor’s office has not confirmed any specific rate changes, the sheer volatility of receipts means any policy shift will be scrutinised for its real‑world impact. If the government proceeds with aligning CGT rates to income‑tax levels, it must weigh the short‑term fiscal gains against the long‑term risk of reduced compliance and altered investor behaviour. Moreover, the political fallout from a perceived “tax raid” on savers could undermine broader economic confidence, especially at a time when the UK is seeking to stimulate growth.
Why it Matters
The handling of capital gains tax will shape the Treasury’s ability to fund new initiatives without overburdening households already grappling with rising living costs. Because CGT receipts are notoriously unpredictable, any policy that assumes a linear relationship between rates and revenue risks creating a fiscal hole rather than filling it. The warnings from Burnham, Healey, and leading tax experts underscore that the government must balance the allure of higher headline numbers with the practical realities of taxpayer behaviour. Getting this right is crucial not only for the Budget’s credibility but also for maintaining public trust in fiscal policy at a pivotal moment for the UK’s economic trajectory.
