The Resolution Foundation has called on Chancellor Rachel Reeves to implement changes to capital gains tax (CGT), inheritance tax (IHT), and national insurance (NI) in next month's budget, potentially raising over £20bn annually. The left-of-centre thinktank argues that tax increases in the first budget after an election are a time-honoured tradition, especially given the £22bn hole in public finances identified by Reeves.
The proposals aim to meet a 'triple tax test' of improving efficiency, targeting the better-off, and adhering to Labour's 2024 manifesto commitments. Among the measures, the foundation suggests aligning CGT rates on shares with dividend tax rates, taxing property capital gains as income, and introducing CGT exit charges when leaving the country. These changes could raise up to £12bn a year.
Additionally, the thinktank recommends levying employer NI on pension contributions, which could generate £9bn, while abolishing employee NI on such contributions to leave typical workers better off. Closing IHT loopholes, such as ending business and agricultural reliefs and including pension pots, would raise a further £2bn annually.
Adam Corlett, a principal economist at the Resolution Foundation, stated: 'The chancellor's self-imposed constraints on not raising income tax, VAT, national insurance or corporation tax don't leave her much room for manoeuvre... Long overdue reforms to IHT, CGT and pension contribution reliefs would fit the bill and could raise over £20bn if needed.'
The foundation also urged Reeves to scrap the scheduled rise in stamp duty, due in April, at a cost of £1.8bn, while maintaining the fuel duty increase. Longer-term reforms to business rates, council tax, and road pricing were also recommended.
