Former Health Secretary and contender for the Labour Party leadership Wes Streeting MP has proposed radical reforms to Capital Gains tax (CGT).
Mr Streeting’s proposals for a “wealth tax that works” would see CGT aligned with income tax, in a move which he claims could raise an additional £12bn a year for the Government.
He told the BBC that the current system penalises work and his changes would encourage investment in the UK by entrepreneurs.
Rachael Griffin, tax and Financial Planning expert at Quilter, said that aligning income tax and capital tax could not only see increased costs for those selling assets, but could also lead to investors becoming more exposed to concentration risk.
She said: “Equalising rates at up to 45% for additional rate taxpayers would markedly increase the cost of selling assets such as shares and second homes. At those levels, the incentive to realise gains weakens, raising the risk of a lock in effect where investors delay or avoid disposals altogether. It may also entrench a ‘hold until death’ mindset, as investors defer sales to benefit from the capital gains uplift on death, further undermining the tax take.”
CGT receipts over the past couple of years show how asset owners react to markets and policy changes. In the 2025/6 tax year receipts reached £22.2bn, up from £13.7bn the previous year and well above the previous peak of £17bn. The surge seems likely to reflect investors bringing forward disposals to crystallise gains ahead of upcoming changes to CGT.
Ms Griffin explained: “That is the central risk with aligning CGT to income tax. Higher rates change behaviour. Investors may hold assets for longer, defer rebalancing decisions or rely more on tax wrappers. Over time, that can suppress transaction levels and make tax receipts more volatile rather than consistently higher.
“There are wider consequences for the economy. CGT plays an important role in recycling capital, and if higher rates discourage disposals, capital becomes more static. In the housing market this could limit supply and reduce mobility among second home owners and landlords. Across investment markets, it can leave portfolios less aligned to changing conditions.
“From a Financial Planning perspective, the shift would introduce greater tax friction. The hurdle to sell and reinvest becomes materially higher, increasing the risk of inertia and leaving investors more exposed to concentration risk over time.”