Healey Rejects Capital Gains Tax Hike in UK Budget 2026

Chancellor John Healey will not raise capital gains tax (CGT) in next week’s UK budget, despite calls from senior cabinet colleagues to do so. The decision, first reported by the Financial Times and The Times, means the Treasury will instead likely rely on raising taxes on banks’ profits to fund public services.

The move marks a significant shift in fiscal policy, prioritising wealth creation and investment over direct tax increases on individuals. It also signals a victory for those within the government who argue that higher CGT could backfire by discouraging asset sales and driving wealthy individuals to move their money offshore.

Why Healey Decided Against a Capital Gains Tax Increase

According to Treasury sources, the chancellor concluded that any increase in CGT might ultimately cost the Treasury money. Wealthy individuals could defer selling assets or relocate to jurisdictions with lower tax rates, reducing the overall tax take.

This concern is not unfounded. Capital gains tax is levied on profits from selling assets that have increased in value, such as second homes, shares, or business interests. When rates rise, behaviour changes—and the government’s expected revenue can fall short.

In a speech last month, Healey emphasised his desire to make Britain a country of wealth creation. “I want to see this country as a country of wealth creation. I want our government decisions and policies to raise the levels of confidence and investment and profit in British business,” he said. He also noted that the cost of business has grown since Covid and that growth is the only long-term solution.

Who Pushed for Higher Capital Gains Tax?

Several senior Labour figures, including Louise Haigh and Wes Streeting, had previously suggested raising CGT as a route to equalising the tax treatment of income and capital gains. They argued that it would make the system fairer and help fund public services.

However, the chancellor’s decision reflects a broader debate within the government about how to balance fairness with economic growth. With the budget approaching, the focus has shifted to alternative revenue sources, particularly a bank tax.

What the Bank Tax Means for the Treasury

Raising taxes on banks’ profits is now expected to be the main revenue raiser in the budget. This approach targets a sector that has benefited from higher interest rates and is seen as less likely to relocate or reduce investment in response to higher taxes.

Banks have already faced a series of tax changes in recent years, including the bank surcharge and the digital services tax. The new measure could further strain the sector, but it may be more politically palatable than raising taxes on individuals.

How Capital Gains Tax Works and Why It Matters

Capital gains tax is charged on the profit when you sell or dispose of an asset that has increased in value. The rate depends on your income tax band and the type of asset. For residential property, for example, higher-rate taxpayers pay 28% on gains, while basic-rate taxpayers pay 18%.

Changes to CGT can have far-reaching effects on property investors, shareholders, and business owners. A higher rate might discourage investment or prompt asset sales before the new rate takes effect. Conversely, a lower rate could stimulate economic activity.

For a deeper understanding of how CGT works and its potential impact, see this guide on capital gains tax and the impact of another hike.

What This Means for Investors and Homeowners

For now, investors can breathe a sigh of relief. The decision not to raise CGT means that those planning to sell second homes or shares will not face a higher tax bill immediately. However, the budget could still bring other changes, such as adjustments to reliefs or allowances.

Property investors, in particular, should stay alert. The government has been reviewing tax treatment of landlords, and further reforms could be on the horizon. As reported in this analysis of Australia’s budget 2026 capital gains tax and negative gearing reforms, other countries are also grappling with similar issues.

Meanwhile, the UK’s decision contrasts with proposals in other jurisdictions. For instance, capital gains tax reforms may cut property investor bills in some regions, highlighting a global debate on how best to tax wealth.

Key Takeaways from the Budget Decision

• No CGT hike: The chancellor has ruled out raising capital gains tax in the upcoming budget.
• Bank tax to fund support: Higher taxes on banks’ profits will likely be the main revenue raiser.
• Wealth creation focus: The government aims to boost investment and confidence in British business.
• Behavioural concerns: Treasury fears that higher CGT could lead to asset deferral or capital flight.
• Investor relief: Those planning to sell assets face no immediate increase in their tax bills.

Comparison of Potential Revenue Raisers

What to Watch Next

As the budget approaches, all eyes will be on the chancellor’s final decisions. The bank tax is expected to be detailed, along with any changes to allowances and reliefs. Investors should also watch for signals on future CGT policy, as the debate is far from over.

The broader fiscal context is also important. With pressure on public services and a slowing economy, the government must balance revenue needs with growth. The decision to spare CGT is a bet that wealth creation will ultimately yield more tax revenue than higher rates. The background to this story is set out in John Healey Chancellor: Fiscal Hawk or Big Spender?. A related thread runs through John Healey Chancellor: Fiscal Hawk or Big Spender? Analysis.

For a related perspective on budget decisions and tax policy, see this analysis of the Healey budget: no capital gains tax hike, bank tax to fund support. It provides additional context on the political and economic considerations at play. Earlier coverage in John Healey Warns of Tough First Budget Impact on UK Economy shows how the argument developed. A closer look at the same subject appears in Government Contracts to Require Job Creation Instead of Green.