Labour, in contrast to the Conservative Party, has not pledged to freeze capital gains tax.
While Sir Keir Starmer has explicitly ruled out the imposition of capital gains tax on the sale of an individual’s primary residence, which remains exempt under the current legislation, there has been no broader commitment regarding potential increases in the capital gains tax rate or adjustments to the existing threshold.
Currently, the threshold at which capital gains tax becomes applicable is £3,000.
Any increase in the tax rate or reduction in this threshold could have significant financial implications for individuals with secondary properties, landlords, business owners, shareholders, and others disposing of valuable assets.
According to Sarah Coles of Hargreaves Lansdown, while Labour has not dismissed the possibility of increasing capital gains tax, such a move could allow the government to fulfill its promise of not raising taxes for “working people” by instead targeting wealth. However, this approach presents a delicate balancing act, as it may conflict with Labour’s broader economic objective of fostering wealth creation. Should Labour pursue changes to the capital gains tax structure, they would have several potential avenues to explore.
Chris Rudden, head of UK investment consultants at Moneyfarm, noted that although Labour has pledged not to increase income tax or National Insurance, there is a concern that capital gains tax may still be at risk of future adjustments. Nevertheless, the Treasury has yet to fully assess the impact of the recent reduction in the CGT allowance to £3,000 by Jeremy Hunt. If the resultant increase in capital gains receipts is substantial, it might mitigate the need for further changes.
It’s important to consider the broader implications of any adjustments to capital gains tax, particularly in a context where the UK population is already perceived to under-invest in their financial futures. Heightening the tax burden on investments could create additional barriers, potentially discouraging new investors.
(Source https://www.telegraph.co.uk/money/when-will-labours-first-budget-taxes/)
