Wes' wealth tax

If politicians truly want CGT aligned with income-tax rates, they must bring back indexation relief – the very safeguard scrapped in 2008 when the rate was halved to keep the system simple.

Without it you’re taxing paper gains that are just inflation, not real wealth. We’ve been round this circuit for decades: rates yo-yo, reliefs appear and vanish, investment decisions get warped by tax timing.

Streeting’s ‘wealth tax that works’ is slick politics, but it ignores why indexation exists – to tax only real economic profit.

Britain doesn’t need another tax hike dressed as fairness. It needs politicians to stop raising taxes, stop loading burdens on the businesses and entrepreneurs who create jobs, and finally build the pro-growth environment the country actually needs to thrive. It is this that generates long term growth and increasing tax revenues.

Sheer economic illiteracy from Wes Streeting, whose background is in student politics, Stonewall, and a Labour-affiliated political think tank before becoming a Labour MP and, until recently, Minister. Annual net wealth taxes peaked in the 1990s when 12 European nations utilized them. Since then, the vast majority, including France, Sweden, Germany, Austria, and Denmark, repealed them. They have failed to meet expectations due to three recurring structural issues. A low revenue yield as carve-outs and exemptions drastically eroded the tax base. Most generated just 0.2% of GDP, a fraction of income tax yields; capital flight as high-net-worth individuals and capital routinely fled to lower-tax jurisdictions, and the high overheads incurred by the tax authorities. And this announcement, on top of the IMF issuing only this week, explicitly states that the UK tax burden is maxed out. Bonkers.

Bringing capital gains tax closer to income tax sounds politically attractive because it taps into the idea that wealth should be taxed more fairly than work.
But in practice, I think the £12bn figure is optimistic. Capital gains tax is very behavioural. Unlike income tax, people can often choose when to realise gains, and high-net-worth individuals are usually the most financially flexible. Many people simply won’t sell assets, will hold investments longer, move into more tax-efficient structures, or shift wealth into pensions, ISAs, trusts or even overseas arrangements.

I think the bigger issue is simplicity. The tax system has become increasingly complex, and constant speculation around wealth taxes often encourages defensive financial planning rather than productive economic activity.

Wes Streeting’s proposal to align CGT with income tax is highly workable administratively, but economically risky. It addresses fairness by ensuring wealth is not taxed less than work, potentially raising up to £12bn to plug public spending gaps.

The primary risk is a sharp drop in tax revenue via behavioral shifts. Higher rates disincentivise investment, prompting wealthy individuals to hoard assets, use avoidance structures, or emigrate.

Ultimately, while politically attractive for fairness and grabbing headlines, it threatens UK competitiveness. The policy will likely yield short-term cash but cause long-term economic drag by stifling entrepreneurship.

Wealth creators, who contribute the most to the tax coffers, take the risks and put their finances on the line to provide jobs for millions across the country. We need to incentivise wealth creation for the great good for all. CGT is often paid on growth in assets that have already been taxed when originally created.