Will Labour hike capital gains tax on business sales?

Labour may tinker with capital gains tax (CGT) and trim related reliefs. What does this mean for small businesses?

Chancellor Rachel Reeves Visits The National Manufacturing Institute Scotland
(Image credit: Andy Buchanan - Pool/Getty Images)

Fears are growing that business owners could find themselves on the wrong end of capital gains tax (CGT) rises in next month’s Budget. The gap between income tax and CGT rates is an obvious target for Rachel Reeves, the chancellor, as she looks to raise more money for the Treasury. The tax bill on sales of businesses may therefore be set to rise.

There are several possibilities for reform. The simplest measure would simply be to raise CGT rates. Currently, if you sell your business, you pay a higher rate of CGT of 20%; that compares with the higher and additional rates of income tax of 40% and 45% respectively. One option for the chancellor would thus be to raise CGT rates, though equalising them with income tax would leave the UK with one of the costliest CGT regimes of all advanced economies worldwide.

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David Prosser
Business Columnist

David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.