Millionaire business owners: increase CGT to raise £14bn
Newsletter issue – November 2024
As Budget day inches ever closer, one of the leading topics at the heart of speculation continues to dominate the headlines. Namely, Capital Gains Tax (CGT).
With many tax rises ruled out by Labour (Income Tax, NI, VAT) since the General Election campaign began, and since confirmed by the new Chancellor, there have been few areas left that could be tinkered with whilst raising the kind of cash that the Treasury purportedly needs to raise.
We've heard the £22bn so-called blackhole in the public finances referenced by Ministers many times now. And it looks highly likely - from commentators' assessments and media reports - that CGT will indeed be reformed to help the cause.
Now, a group of millionaire business owners have backed the idea of increasing CGT. The group of wealthy investors said raising the tax rate on asset disposals would help to bring vital funds for public services and claimed economic growth would not be slowed.
Amongst those quoted in the mainstream media was Mark Campbell, the millionaire co-founder of Higgidy pies. He believes higher rates of CGT would not 'scare away real investors' in Britain. 'Entrepreneurs don't think about [it] when they create businesses. [It] would not have stopped us investing in Higgidy.'
He added: 'The UK needs a fairer tax system to invest in its future, and those of us who've benefited the most should contribute more so that we have a healthy society and economy for future entrepreneurs to operate within.'
The comments were also linked to a report by the centre-left IPPR thinktank, in which the group of millionaire entrepreneurs said they would be happy to see the rate levied on capital gains rising to the same levels as the higher rate of income tax.
The IPPR report argues that 'CGT is not a primary driver of investment decisions' and says: 'Entrepreneurs and investors alike focus much more on issues such as access to financing, market opportunities, and broader economic conditions.'
Chancellor Rachel Reeves has been quoted in the last year or so saying there were no plans to raise CGT, but there was virtually no mention of it in the official Labour manifesto, suggesting it could be one option to plug the gap in the Treasury's finances.
Several analysts have suggested we're likely to see a return to the policy of 1989 when Conservative Chancellor Nigel Lawson changed the CGT rules so that it was applied at whatever the taxpayer's marginal rate was.
Of course, we'll have to wait and see what is announced at the Budget on 30 October. We'll have a report and updates on the day for you.