Andy Burnham, the Labour leader, is facing pressure to implement a significant tax increase on capital gains, going further than Chancellor Rachel Reeves's recent hikes. Proposals include aligning capital gains tax (CGT) rates with income tax and removing the tax-free uplift on inherited assets, which could affect a broad swath of the population, not just the wealthy.
What Is Capital Gains Tax and Who Pays It?
CGT is levied on profits from selling assets such as second homes, investment properties, shares outside ISAs, antiques, cryptocurrencies, and businesses. The annual tax-free allowance has been slashed by the Conservatives from £12,300 to £3,000. Chancellor Reeves raised CGT rates in her first Budget to 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers. However, Labour figures like Wes Streeting and Burnham adviser Louise Haigh are pushing for far steeper increases.
Record CGT Receipts Still Not Enough for Labour
In the 2025/26 tax year, CGT receipts hit a record £22.2 billion, a 62% rise from £13.7 billion the previous year. The Office for Budget Responsibility predicts CGT receipts could reach £27.3 billion by 2029/30. Despite this growing haul, Labour wants to go further.
Louise Haigh's Radical Proposals
Louise Haigh, the former Transport Secretary who resigned over a fraud conviction but is now back in Burnham's favour, is advocating for CGT rates aligned with income tax: 20%, 40%, or 45% depending on the tax bracket. She also supports scrapping the CGT uplift at death, which currently allows beneficiaries to sell inherited assets without paying CGT on gains accrued before the owner's death.
Gary Smith, partner in financial planning at Evelyn Partners, warned this would be a political hot potato. "It could hit people across the whole wealth spectrum, and not just the wealthy," he said.
Impact of Scrapping the Uplift at Death
Under current rules, if an asset bought for £100,000 is worth £200,000 at death, there is no CGT bill. Under Haigh's proposal, beneficiaries could face tax on the £97,000 gain after the £3,000 allowance. Smith calculated a tax bill of £17,460 at 18% or £23,280 at 24%, which would be even higher if rates were raised or equalised with income tax. An inheritance tax bill could also apply, creating a double death tax. For business owners, a company worth £5 million could incur millions in tax when passed on.
Concerns Over Inflation and Exit Tax
Dan Neidle, founder of Tax Policy Associates, warned that CGT currently applies to "purely inflationary paper gains," not real gains after inflation. He said this must change if major reforms are made. There is also talk of an "exit tax" to prevent entrepreneurs from leaving Britain to avoid higher charges, which could discourage business creation.
If Burnham pushes through these changes, millions may suffer, not just the wealthy. The forgotten tax could become a major political liability.
