Capital gains tax rise floated by Labour donor ahead of Budget

A capital gains tax rise is back on the table, 22 days before Chancellor John Healey's first Budget on 28 October. Labour donor and Ecotricity owner Dale Vince has asked the Treasury to bring capital gains tax gradually in line with income tax. That is according to Nation.Cymru's report of The Telegraph's story. Capital gains tax (CGT) is the tax on the profit when you sell an asset that has gone up in value. The Treasury says tax decisions are set out at fiscal events, so this is a proposal, not policy.

From a portfolio perspective, the gain on a rental property you sell is exactly what this targets. If you hold 5 to 12 properties with years of growth in them, the rate on exit matters more than almost any other number in your plan.

What has Dale Vince proposed on capital gains tax?

Vince wants to raise the personal allowance (the income you can earn before paying income tax) from £12,570 to £15,570. He would fund it by raising CGT and by ending interest payments on Bank of England reserves, according to Nation.Cymru. Prime Minister Andy Burnham and the Chancellor are reviewing the idea, The Telegraph reported.

"We've spent years squeezing people at the bottom while handing billions to the banks and allowing wealth to be taxed more lightly than work. That's backwards," Vince said in his statement.

The detail matters. Interactive investor reported on 22 September that Vince proposes equalising CGT with income tax over five years. That would take the top rate to 45% in England, Wales and Northern Ireland, and 48% in Scotland. MoneyWeek reported that the allowance rise would cost the Treasury £20 billion. Vince commissioned modelling from the National Institute of Economic and Social Research (NIESR, an independent economics think tank). That modelling puts the lowest fifth of earners £600 a year better off, MoneyWeek said.

A Treasury spokesperson said decisions on tax are "a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals."

What would aligned CGT rates mean for a property portfolio?

Start with today's rules. For gains from 6 April 2026, GOV.UK sets CGT at 18% within the basic rate band and 24% for higher and additional rate taxpayers. The annual exempt amount (the tax-free slice of gains each year) is £3,000 (GOV.UK). You do not usually pay CGT when you sell your own home, so this bites on rental and investment property.

Income tax in England, Wales and Northern Ireland runs at 20%, 40% and 45% (GOV.UK). Scotland sets different income tax bands, which is why interactive investor puts the aligned top rate there at 48%.

Here is an illustrative example. Say you are a higher-rate taxpayer selling a buy-to-let (BTL) flat with a £50,000 gain, and the whole gain stays within the 40% band. Take off the £3,000 allowance and £47,000 is taxable. At 24% you pay £11,280 today. At an aligned 40% you would pay £18,800. That is £7,520 more on one sale.

Scale that across a portfolio and your return on a planned exit changes materially. But no rate has been announced, and Vince's plan phases in over five years. Our free stamp duty calculator covers the entry side of the same deal, which is worth having next to your exit numbers.

Would a capital gains tax rise actually raise the money?

Economists are split. Paul Johnson, former director of the Institute for Fiscal Studies (IFS), called the numbers "nonsensical" on X, interactive investor reported. He said HMRC estimates a 10-percentage-point CGT rise would trigger a £3.5 billion fall in revenue.

Current IFS director Helen Miller warned against a quick fix (Nation.Cymru). "We shouldn't just think that there's a simple solution where you put the rate up and all this money arrives at the Treasury," she told the Press Association. Pranesh Narayanan of the IPPR think tank said reforming CGT could raise £8-14 billion per year.

The reason is behaviour. Investors can hold rather than sell, and there is no CGT to pay on death, interactive investor noted. HMRC figures it cites show CGT receipts rose 89% in 2024-25 to a record £24.2 billion. Interactive investor attributed a sizeable chunk of that to investors selling ahead of the Autumn Budget 2024.

That last point is the one I would sit with. Last time, plenty of people sold early on rumour, and, as interactive investor put it, the government ultimately opted for a tamer increase. If you hold over the cycle, a forced sale to beat a rate that never arrives can cost you more than the tax. Our property investment strategies hub covers how holding periods shape a portfolio's returns.

What has the government said since?

Nothing that confirms or rules it out. Burnham was asked about the balance between taxing wealth and income (Newham Recorder). "We had two budgets in 2024 and 2025 and we have to be conscious of the extent to which we have raised revenue," he said. "And we have to make sure we get the balance right."

Healey spoke at the Labour Party conference. He said: "Just to be clear from the outset here, I'm not going to give you any answers or signals that will fuel Budget speculation" (Saxo). Saxo noted there was no mention of tax rises in the speech. Conservative leader Kemi Badenoch said she would not support a CGT increase, Nation.Cymru reported.

The date is fixed. Healey's letter to the Treasury Committee of 31 July asked the Office for Budget Responsibility (OBR, the official fiscal forecaster) for a forecast on 28 October 2026. The Budget will accompany it. Until then, every CGT figure in circulation is a proposal. If you are weighing ownership structure as part of your exit plan, our business and systems hub covers how investors set up and scale a portfolio business.

Key takeaways

• Dale Vince proposes raising the personal allowance from £12,570 to £15,570, funded partly by bringing CGT in line with income tax over five years.

• CGT is currently 18% and 24% on gains from 6 April 2026, with a £3,000 annual exempt amount (GOV.UK).

• On an illustrative £47,000 taxable gain, a higher-rate landlord would pay £7,520 more at 40% than at today's 24%.

• The Budget is on 28 October 2026, and the Treasury has not confirmed any CGT change.

• Paul Johnson said HMRC estimates a 10-point CGT rise would cut revenue by £3.5 billion, so the plan's yield is disputed.