Will capital gains tax rise after the general election?

We take a close look at what the political parties have said about CGT. Will they raise the tax or won’t they? Could investors and homeowners be taxed more?

Blocks spelling tax on top of coins
(Image credit: Getty Images)

Capital gains tax (CGT) has become a surprise focus in the general election, with several parties pledging to raise it. Meanwhile, speculation is growing over what Labour might do with the tax if they win on 4 July.

CGT is paid by investors, business owners, and property owners who make a profit when selling a buy-to-let or holiday home.

The Conservatives have ruled out increasing CGT, but the Lib Dems and Green Party want to raise it.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Labour didn’t include capital gains tax in their manifesto, bar a mention about closing a loophole for private equity workers.

The party instead chose to focus on its promise that there would be no increases to income tax, National Insurance (NI), VAT and corporation tax.

This has naturally led to questions around whether a Labour government would therefore tinker with other taxes like inheritance tax and CGT to raise money.

While many of the rumours have been whipped up by the Tories, a senior Labour official recently “liked” a LinkedIn post that said raising CGT would be “politically wise”, leading to more speculation that a tax hike could be on the way.

On the other hand, Labour leader Keir Starmer said at the weekend he was happy to rule out putting capital gains tax on the sale of primary homes. “It was never our policy,” he said.

But there are plenty of other tweaks to CGT that could be made by a new government hoping to raise revenue to fund its policies.

We look at what the political parties have said so far on capital gains tax - and what Labour could do.


This is an easy one. The Conservative manifesto stated: “We will not increase capital gains tax.”

It also said that it would introduce CGT relief for landlords if they sold the property to their tenants: "To further support homeowners, we will introduce a two-year temporary capital gains tax relief for landlords who sell to their existing tenants."

However, it’s worth pointing out that investors, second homeowners, buy-to-let landlords and business owners have already been hit hard by changes to CGT under the Tory government.

The annual exempt allowance has been repeatedly slashed. In 2022-23, it was £12,300. Today, it stands at just £3,000.

HMRC figures estimate that 260,000 more individuals and trusts will be paying CGT for the first time by 2024-25 because of the cuts to the allowance.

Liberal Democrats

The Liberal Democrats have been vocal in their aim to reform capital gains tax, and use it as a cash cow to make it their second largest new revenue stream.

They hope to create more than £5 billion of revenue by reforming CGT. 

The party say they want to “close loopholes exploited by the super wealthy” by adjusting CGT rates and “basing them solely on capital gains”. 

The party would also increase the CGT tax-free allowance from £3,000 to £5,000.

Charlene Young, pensions and savings expert at investment platform AJ Bell, comments: “With public finances currently leaving little to no headroom for spending, it’s no surprise that CGT is attracting the attention of the Lib Dems. 

“The pure rate of tax on gains is lower than taxes on earned income, and it’s not payable on your main residence.

“Increasing the rate of CGT substantially would be an unwelcome change for many investors and property owners. Although the manifesto indicates that any increase in rates should be accompanied by a modest rise in the tax-free allowance to at least offset some of the impact on smaller shareholders who’ve been dragged into the CGT web in recent years.”

The rate of CGT you pay depends on your income tax band and the asset. If you’re a higher or additional-rate taxpayer you’ll pay 24% on your gains from residential property (primary residences are exempt), or 20% on investment gains.

For basic-rate taxpayers, the rates are 18% and 10% respectively.

Young adds: “The manifesto doesn’t explain what the new rates will be, but to ‘close loopholes’ between earned income tax and investing gains would involve bringing the tax rates closer together, potentially meaning a tax rate of up to 45% - equivalent to the additional rate of income tax.”

Green Party

The Greens have gone a step further by pledging to align the rates of income tax and CGT. The party claim it would only affect 2% of taxpayers.

However, AJ Bell argues that many investors and business owners would be hit by the move - and that the policy could have the opposite effect of raising money for the government. 

The investment firm points out that the government’s own estimates show that if the highest CGT rate rose by 10 percentage points it would actually cost the government £2 billion by 2026-27. 

“That’s because big increases in tax tend to impact investor behaviour. For example, investors may hold onto assets for longer rather than realising gains, find different ways to shelter their gains from the taxman, or own second homes through companies to avoid the tax altogether,” it said.


With Labour the clear front-runner in the election polls, the million-dollar question (or should that be the £3,000 question to reflect the CGT allowance) is will they raise CGT if they get into power?

Private equity workers will see a tax increase. Labour says it will close a loophole for private equity workers that allows them to treat performance-related pay as capital gains. It means the sector faces paying higher rates through income tax.

But apart from Starmer’s commitment to not slap CGT on primary residences, we haven’t heard much else from Labour officials about the tax on the campaign trail.

“Starmer made it clear that nothing in the manifesto will need additional tax rises, but Labour has not ruled out changes to capital gains tax,” comments Sarah Coles, head of personal finance at the wealth manager Hargreaves Lansdown.

“At this stage, it’s difficult to know exactly what these changes might be, or whether they would be needed, but for investors with holdings outside tax wrappers, there could be an extra cost. Labour said it is advocating for wealth creation, so it will have to tread carefully on CGT if it wants to ensure the right incentives are in place to create this wealth.”

Changes to CGT could include amending CGT rates or the annual tax-free allowance, or changing the scope of reliefs.

If you’re wondering how a Labour government could affect your finances - and steps you can take now - check out How to protect your wealth from Labour

Will Labour raise CGT?

Chris Etherington, private client partner at the accountancy RSM, is doubtful that Labour would raise CGT. 

He admits that Starmer’s “wide-ranging veto on tax rises leaves very little room for a future chancellor to manoeuvre and naturally leads to speculation that capital gains tax (CGT) rates should be reviewed”.

Many people assume that CGT is a tax for the wealthy, and research shows it was paid by fewer than 3% of UK adults between 2011 and 2020, according to Etherington.

However, a large amount of CGT revenues is driven by the sales of businesses, so if Labour did raise the tax, it could be seen as an anti-business move.

Etherington points out that shadow chancellor Rachel Reeves is aware of this, stating in an interview with BBC Radio 4’s Today programme in March 2023: “I don’t have any plans to increase capital gains tax. There are people who have built up their own businesses who maybe at retirement want to sell that business. They may not have had huge income through their life if they’ve reinvested in their business, but this is their retirement pot of money.”

Etherington also echoes AJ Bell’s point about how a change in CGT could impact investor behaviour. 

He explains: “In the year to 5 April 2024, CGT is estimated to have generated over £15bn for the Treasury but it is too simplistic to suggest that doubling the main rate of CGT from 20% to 40% would generate an extra £15bn.

“Latest statistics highlight 45% of CGT revenues come from large disposals generating gains of £5m or more. Introducing a 40% or 45% rate of CGT would undoubtedly distort taxpayer behaviour in relation to these larger disposals, potentially draining the Treasury of much-needed funds.”

He concludes: “A CGT rate of 45% would be one of the highest in the world and nearly every country in Europe could inadvertently become a more attractive place than the UK to crystallise gains. It is little wonder that a CGT rate rise may not be part of Labour’s immediate plans and there are good reasons why they may be keen for that to remain the case.”

Ruth Emery
Contributing editor

Ruth is an award-winning financial journalist with more than 15 years' experience of working on national newspapers, websites and specialist magazines.

She is passionate about helping people feel more confident about their finances. She was previously editor of Times Money Mentor, and prior to that was deputy Money editor at The Sunday Times. 

A multi-award winning journalist, Ruth started her career on a pensions magazine at the FT Group, and has also worked at Money Observer and Money Advice Service. 

Outside of work, she is a mum to two young children, while also serving as a magistrate and an NHS volunteer.