Chancellor Healey Rejects Capital Gains Tax Increase for October Budget

UK Chancellor John Healey will not increase capital gains tax (CGT) in the budget scheduled for October 28, 2026, a decision affirmed on October 20, 2026[1][3][4]. This move comes despite prior advocacy for a CGT rise from prominent Labour figures, including First Secretary of State Louise Haigh and Defence Secretary Wes Streeting[1][3][8].

This decision directly impacts individuals who sell assets such as second homes or shares, as CGT is applied to the profits made from these transactions[1][5]. It also signals the government's economic strategy, prioritizing wealth creation and business confidence over potentially increased revenue from higher capital gains taxes[1][3].

The Chancellor's Decision

John Healey's choice not to raise capital gains tax was reported by multiple sources on October 20, 2026[1][2][3]. Treasury sources indicated that the Chancellor decided against an increase due to concerns that it could lead to wealthy individuals deferring asset sales or moving their assets out of the country, which might ultimately cost the Treasury revenue[1][3][4]. Current CGT rates are 18% for basic-rate taxpayers and 24% for higher-rate taxpayers on profits from asset sales[3][8]. This contrasts with income tax rates that can be as high as 45%[3]. Healey previously stated his desire for the UK to be a country of wealth creation, emphasizing that government decisions should raise confidence and investment in British business[1].

Previous Calls for a CGT Hike

Before Healey's decision, cabinet colleagues Louise Haigh, the First Secretary of State, and Wes Streeting, the Defence Secretary, had advocated for raising capital gains tax[1][3][6]. Wes Streeting, in particular, had championed a rise on May 21, 2026, when he was serving as former health secretary[11]. He referred to it as a "wealth tax that works" and pointed to a growing disparity between earned income and other forms of wealth[11]. Streeting argued that the current system penalized work and was unfair, proposing to equalize the tax on assets and income[11]. Other Labour figures and think-tanks also supported higher CGT rates, arguing that it is wrong for wealthy individuals to pay a lower tax rate on asset sales compared to their income[3][12].

The Treasury's Rationale

The Treasury's position, as explained by officials, is that raising CGT rates could prompt businesspeople to alter their behavior, potentially by leaving the UK or delaying asset sales[3]. This behavioral change could lead to a drop in revenue for the exchequer[3]. HM Revenue & Customs estimated that a 10 percentage point increase in the higher rate of CGT could reduce receipts by £3.6 billion in 2028-29, partly due to these "behavioral impacts"[3][12]. Business leaders had also warned against such a move, stating it could damage economic confidence[3][12]. Lord O'Neill of Gately, an adviser to Prime Minister Andy Burnham, cautioned that raising capital gains tax would send "very much the wrong message to business"[4][6][12].

What we could not confirm

We could not confirm the specific alternative revenue-raising measures John Healey will present in the October 28 budget, beyond reports of an expected increase in taxes on banks' profits[1][4][8]. We also could not confirm the precise timing or details of any cost-of-living support package that the bank tax revenue is expected to fund[4][8].