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 ...
		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 ......
		Why farmers need an inheritance tax transitional gifting rule now Older farmers face a cliff edge in April 2026. An inheritance tax transitional gifting rule could ease pressure and protect family businesses. Here's why it matters and what should happen next ......
		Inheritance Tax risk for family-owned businesses: act before reliefs shrink! Here's the lowdown on Inheritance Tax risk for family-owned businesses and why time matters. Reliefs are tightening, and proactive planning can save millions. Start now to secure business succession and family wealth ......
		A pension tax raid would put the NHS in danger A pension tax raid risks driving GPs to retire early and undermining new neighbourhood care plans. It could also destabilise NHS funding and deepen workforce gaps. Clarity on tax reforms is urgently needed, especially with th...
		HMRC launches real-time HICBC payment for smoother PAYE HMRC's real-time HICBC payment lets employees settle the charge through PAYE. It's quick, accurate and avoids self-assessment for many. It's a practical win for households receiving child benefit ......
		Are directors' loans a good cash flow strategy or just another tax trap? Here's a straight-talking take on directors' loans. They can ease cash flow or invite HMRC scrutiny. Used with discipline, they work; misused, they hurt ......
		Salary or Dividends: Optimising Income for Directors Directors of limited companies must make informed decisions about their remuneration strategies. Optimising income for directors involves balancing salaries and dividends while considering significant changes to tax legislati...
		Should Directors Use Salary Sacrifice To Reduce Income Tax And National Insurance? Wondering if salary sacrifice to reduce tax is worth it? You can cut NI, boost pension contributions, and keep payroll efficient. Here's how it works for directors ......

Other bloggers you may like ...
		Relocating To Milton Keynes? Short Stay : MK Can Accommodate You! Posted by Emily Freeman on https://blog.shortstay-mk.co.uk Considering Relocating To Milton Keynes? Short Stay: MK offers flexible accommodation solutions, making your transition easy while you explore your ne ...
		Finding your career summit: how to identify your core values for decision making Posted by Dave Cordle on https://blog.davecordle.co.uk Imagine setting out on a mountain climb without a map or destination in mind. The path feels uncertain, the terrain unfriendly, and doubts creep in at ...
		2025/26 company car taxable benefits: what drivers and employers need to know Posted by Roger Eddowes on https://blog.essendonaccounts.co.uk What are the company car taxable benefits for 2025/26? Well, with CO2 bands, list price rules, and future rate rises, this is a clear, upbeat take on ...
		Six subtle ways small businesses waste time and how a VA fixes it Posted by Sarah Hannaford on https://blog.sarahpasolutions.co.uk Here's how small businesses waste time without even noticing, and how a Virtual Assistant fixes it. Expect calm inboxes, smoother workflows, and bette ...