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Capital Gains Tax increase: 'Government is sending a clear message that investment is not welcome'

ended 30. October 2024

Rachel Reeves said Capital Gains Tax for most assets would increase to 18% from 10% at the lower rate and increase to 24% from 20% for higher earners, saying changes to the regime would raise 2.5 billion pounds in Labour's first Budget for 14 years which was delivered to Parliament today. 

The increase in capital gains tax brings the rate for most assets into line with the rate payable on property, which Reeves said would be maintained at 18% and 24%.

Expert views are below.

10 responses from the Newspage community

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Kundan Bhaduri
Property Developer and Portfolio Landlord at The Kushman Group
By increasing the lower rate to 18% and the higher rate to 24%, the government is sending a clear message: investment is not welcome. While they claim this change will generate £2.5 billion, the reality is that such punitive measures risk driving away the very investors who fuel growth, innovation, and job creation. It’s as if they’re trying to catch a fox while simultaneously setting fire to the henhouse.

Aligning CGT with property tax rates could deter individuals and small businesses from making essential investments in assets, limiting opportunities for wealth generation. Instead of fostering a vibrant economy where entrepreneurship thrives, this policy shift may create a chilling effect that discourages investment and hampers progress. If this is the new normal, we might as well all invest in wellies and umbrellas because the outlook is decidedly dreary. It’s time for a tax regime that incentivises rather than penalises those willing to invest in the future of this country.
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Patricia McGirr
Founder at Repossession Rescue Network
Labour’s CGT hike hits investors, innovators, and homeowners alike. This increase is more than a fiscal tweak; it’s a message that the UK is prepared to penalise those taking financial risks, building businesses, and investing in their futures. By raising the CGT rate to align with property tax, this Budget essentially doubles down on taxing success. It's not just the wealthy impacted here, it’s everyday investors, small business owners, and even those who’ve put hard-earned money into property and assets.

This approach could stifle the entrepreneurial drive that fuels job creation and innovation. At a time when the UK should be attracting investment to strengthen our economy, these changes risk pushing opportunities elsewhere. Raising £2.5 billion is critical, but let’s not tax away our country’s chance for growth and resilience in the process.
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Anita Wright
Independent Financial Adviser at Ribble Wealth Management
An increase in CGT rates from 10% to 18% (an 80% rise for basic rate taxpayers) and from 18% to 24% (a 20% increase for higher rate taxpayers) will significantly impact investors because investors will retain less of their profits when selling appreciated assets. For example, a gain of £10,000 previously taxed at 10% would incur £1,000 in CGT; under the new rate of 18%, the tax due would rise to £1,800. This reduces net gains and lowers the effective return on investments, which could influence the appeal of capital growth-focused investments. For both basic and higher-rate taxpayers, these CGT rate increases can slow the rate of wealth accumulation, as investors will be left with less of their profits to reinvest.
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Simon Bridgland
Director at Charwin Private Clients
The proof is in the pudding: the anticipated rise in capital gains tax, which many feared, has not materialised. Those who worried it would align with income tax can breathe a sigh of relief as a more measured approach has been adopted.

However, time will tell if Labour remains committed to this budget plan or if they will make adjustments during their tenure in No. 10. The real question is whether this cautious strategy will hold steady or evolve as economic conditions change.
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Gabriel McKeown
Head of Macroeconomics at Sad Rabbit - Substack Newsletter
The budget's grand reveal had all the shock value of a rerun, thanks to the drip-feed of leaks that preceded it, however this won’t have entirely prevented the market impact now that these policies are confirmed. In the lead-up to this announcement, the anticipation of higher capital gains tax led to increased volatility as some investors rushed to sell off profitable shares to lock in current tax rates. Of course, today’s CGT hike increase could still be considered somewhat muted compared with the rumours of a potential rise on par with income tax rates. However, there is a real concern that this increase could lead many investors to question the remaining benefits of investing and business creation when the rewards are taxed away. This could stifle innovation and slow the flow of capital into emerging sectors, with investors favouring safer, lower-yield assets over volatile, high-return opportunities, discouraging investment in small businesses.
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Daniel Wiltshire
Actuary & IFA at Wiltshire Wealth
An 8% increase to the lower rate of CGT could be seen as regressive. With the Annual Exempt Amount at only £3k, these changes will mean that people on a modest income, making modest gains will pay significantly more tax. Whilst those on much higher incomes will see an increase of only 4%. What happened to the principle that 'those with the broadest shoulders should bear the greatest burden'?
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Graham Cox
Director at Bridging Hub
Whilst widely flagged, the increase in CGT will be painful for the asset rich, particularly those who own shares, including business owners who will pay more when they sell their companies. Could be considered anti-growth, but the money has to come from somewhere, and a 4% increase for higher earners is hardly draconian.
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Ben Foster
CEO at The SEO Works
Everyone knew that Captial Gains Tax was set to rise in this budget, with some 'experts' forecasting a rise of over 15%. The reality is a 4% rise for higher earners, which may come as somewhat of a relief to many. Whilst it is still an increase, it seems a reasonable increase.... less of a sharp intake of breath; more of a reluctant exhale. The rise is probably not enough to put people with assets off selling in the long term, and may force more asset sales in the short term ahead of the rate changing.
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Mogens Rye
Founder at Rye Outsourcing
Capital Gains Tax is the single most effective mechanism to push private investments away. I grant the government, that even after the raise planned, the UK capital gains tax will be relatively low compared to for instance Denmark.

It is however always detrimental to investments, when you raise the cost of capital, and in particular for startup companies, where it is a main essential in determinating your location. Given the number of business that can be done digitally these days, it is becoming much more easy to have your company in one country, and operate it from another.

Socialists always end up running out of other peoples money, so it is tempting to turn the tax-wheel. Even the most hardcore Socialists in Denmark has finally caught on to the detrimental effects Capital Gain Tax has on the willingness to accept financial risks, and has begun to lower that as well as inheritance taxes.

If you stick to a 20% give or take Capital Gains Tax, at least make it on realised gains.
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Colin Low
Managing Director at Kingsfleet
This could serve as a fascinating case study. Will individuals choose to hold onto their assets rather than sell and incur the tax? It's important to remember that asset disposals differ from income; you have the flexibility to decide when to make those disposals—except in the case of death—while income is generated independently.

What we will ultimately discover is whether people prefer to avoid the tax and retain their assets or whether they’ll accept the tax burden to free up capital for reinvestment elsewhere. This decision could reshape investment strategies and impact market dynamics significantly. We may be on the brink of a shift where tax considerations drive asset retention over liquidation.