The Dangers of Raising Capital Gains Tax Rates at the Autumn Budget

CREATED BY HELEN BEAUMONT Published: 25/06/2025 @ 09:00AM #capitalgainstax #taxratesdebate #cio #economicrecovery #autumnbudget

The debate surrounding Capital Gains Tax rates intensifies as the Chancellor approaches the Autumn Budget. While potential increases aim to address fiscal challenges, history suggests that drastic rate hikes may hinder rather than help economic recovery ...

Capital gains tax, A burden on our wallets, But a must for growth

The prospect of increasing Capital Gains Tax (CGT) rates has resurfaced as a key policy discussion. The Chancellor, amidst pressing budgetary concerns, might be eyeing CGT as a way to shore up financial deficits. However, there exists a substantial risk that this course of action could have adverse repercussions on both taxpayer behaviour and overall economic activity.

Historically, CGT rates have faced scrutiny, particularly given their reliance on a small pool of high-value taxpayers!

In the financial year leading up to the 5th of April 2023, just 2,000 individuals were responsible for a staggering 37% of all CGT revenues, highlighting a diametric relationship between a few taxpayers and the tax's revenue generation. Many of these individuals realised substantial gains from the sale of unlisted shares, a trend that underscores where the bulk of CGT revenue is derived.

The notion of raising the main CGT rate from its current level - recently increased from 20% to 24% - to align more closely with higher income tax thresholds has been floated within Treasury discussions. However, significant hikes, such as the proposed 39% modelled by officials last year, could inadvertently disincentivise investment and alter individual behaviour significantly.

For many high earners, the potential for a heavier capital gains tax burden may yield a strategic re-evaluation of their investment behaviours, or worse, prompt them to leave the UK entirely and seek tax shelters or alternative jurisdictions.

The concentration of CGT liabilities among a small fraction of the population raises alarms about the efficacy of rate increases. Should the Chancellor implement a larger rise in CGT, it is conceivable that many within this taxpayer bracket may respond by altering their investment strategies, such as delaying sales or withdrawing from the market altogether. The unpredictable nature of such adjustments could ultimately lead to a decline in economic activity, resulting in a net loss of tax revenues rather than the intended financial windfall.

Policymakers must also consider the possible societal
implications of increasing CGT rates!

Many of the individuals affected are business owners who may be contemplating transitions involving the sale of their companies. A burgeoning Capital Gains Tax burden could dramatically affect their decisions, potentially stifling entrepreneurial activities and obstructing new business ventures. This could have a cascading effect, limiting job creation and job security across the economy.

Although the need for increased tax revenue is a pressing concern, a hurried approach could yield unfavourable outcomes. Increasing CGT rates may indeed fill financial gaps in the short term, but such measures risk alienating a vital sector of the economy that plays an essential role in wealth generation and employment.

Balancing the budget should not come at the cost of strangling economic growth.

Until next time ...

HELEN BEAUMONT
Join my mailing list! Click here and be one of the first to know when I publish a new blog post!

Share the blog love ...

Buffer Facebook Twitter Linkedin Pinterest WhatsApp #capitalgainstax #taxratesdebate #cio #economicrecovery #autumnbudget

About Helen Beaumont ...
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist. Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance. When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.

More blog posts for you to enjoy ...
		New Year Nudge: Beat the self-assessment filing deadline without stress Here's the simple reality of the self-assessment filing deadline: it doesn't move, but your stress can. My blog post this week explains why filing early helps, what HMRC charges for delays, and how an online tax return can ke...
		HMRC Taking A Good Look At Savvy Online Sellers HMRC's new data sharing initiative, which aligns with the OECD's global objective to tackle tax evasion, has been met with mixed reactions from online sellers ......
		How HMRC Christmas tax rules trip up festive side hustlers HMRC Christmas tax rules often surprise side hustlers each December. Here's what counts, what doesn't, and when to register. Stay compliant and keep more of your Christmas earnings ......
		Do I need to file a self-assessment tax return? Unsure if you must file a self-assessment tax return? This guide explains who needs to file, what income triggers it, and how to register with HMRC. Get clear before the tax return deadline ......
		Salary sacrifice changes set to hit millions of UK employees Salary sacrifice changes will cap tax-free pension contributions at £2,000 from April 2029. Many employees and employers will face higher costs and new admin. Here's what's changing, who's affected, and how to prepare ......
		Nine ways to beat the Budget tax burden this year Here's my smart, simple guide to beat the Budget tax burden without drama. I'll cover pensions, ISAs, dividends, cash, IHT and more. Read this to prioritise your tax savings and plan ahead with calm planning ......
		Why splitting a business to avoid VAT can backfire badly Splitting a business to avoid VAT may look clever, but it often isn't. HMRC can join entities together where links exist and challenge the arrangement. Consider contracts, commercial reality, and long-term costs before acting...
		Chancellor eyes pension salary sacrifice: a £5.1bn question Rumours in the media suggest the Chancellor may curb pension salary sacrifice in the Autumn Budget. Employers, employees, and HMRC see risks to take-home pay and saving habits. Here's what could really happen ......

Other bloggers you may like ...
		Serviced accommodation for contractors in Milton Keynes: a smarter base for work Posted by Emily Freeman on https://blog.shortstay-mk.co.uk If you want a calm base that simply works, serviced accommodation for contractors beats hotels and patchy Airbnbs. You get your own place, proper faci ...
		You've been made redundant? Let's separate you from the job Posted by Dave Cordle on https://blog.davecordle.co.uk If you've been made redundant, it can feel personal, but it isn't. The role has gone, not your strengths, experience or future. Let's reset the story ...
		Key payroll changes for 2026 every UK employer should plan for now Posted by Roger Eddowes on https://blog.essendonaccounts.co.uk Key payroll changes for 2026 are mainly about higher wage floors, tighter thresholds and better forward planning. My blog post today walks through wha ...
		What an Online PA actually does for busy professionals Posted by Sarah Hannaford on https://blog.sarahpasolutions.co.uk Wondering what an Online PA actually does day to day? They keep schedules, inboxes and documents under control, while handling research and process-he ...