Streeting’s £12-billion tax plan could backfire: analysts
Key Points
- Wes Streeting has proposed aligning capital gains tax with income tax at 20%, 40% and 45%, claiming the change would raise £12 billion a year
- Quilter warned the plan could backfire by encouraging investors to delay or avoid disposals, suppressing receipts rather than raising them
- CGT receipts reached £22.2 billion in 2025/26, up from £13.7 billion the previous year, partly as investors brought sales forward to lock in lower rates
- The firm flagged a risk that investors hold assets until death to benefit from the capital gains uplift, further reducing the tax take
- Wider effects could include reduced housing market mobility and more static investment portfolios
Wes Streeting’s pitch to align capital gains tax with income tax, which he claims would raise £12 billion a year, could prove counterproductive by suppressing the very disposals it relies on, wealth manager Quilter has warned.
The former Health Secretary, who resigned from cabinet this month and has signalled his intent to challenge Keir Starmer for the Labour leadership, set out the proposal in an interview with the BBC’s Political Thinking Podcast.
Streeting wants CGT rates to mirror income tax bands at 20%, 40% and 45%, with a person’s CGT band calculated by adding income and asset profits together.
He also wants to close loopholes that let people disguise income from work as capital gains, such as taking pay in shares rather than salary.
Quilter said the policy logic depends on behavioural assumptions that may not hold.
CGT receipts reached £22.2 billion in 2025/26, up from £13.7 billion the previous year and well above the previous peak of just under £17 billion, the firm said. Strong asset prices have played a role, but policy changes have amplified the rise after the annual exemption was cut sharply and rates were lifted in 2024.
“Investors appear to have brought forward disposals to crystallise gains under a changing regime,” said Rachael Griffin, tax and financial planning expert at Quilter. Once that rush passes, activity may slow as higher rates take hold and investors adjust.
That sensitivity is the central risk in Streeting’s plan. At rates of up to 45% for additional rate taxpayers, the incentive to realise gains weakens, the firm said.
The result could be that investors stop selling altogether, leaving capital locked inside assets. It may also entrench a strategy of holding to death, as the capital gains uplift on death wipes the liability entirely, undermining the tax take further.
Wider economic consequences would follow. CGT plays an important role in recycling capital, and if higher rates discourage disposals, capital becomes more static, the firm said.
In the housing market this could limit supply and reduce mobility among second home owners and landlords, with knock on effects for buyers further down the chain. Across investment markets, portfolios may become less responsive to changing conditions.
The Treasury has been cool on the pitch. Lucy Rigby, Chief Secretary to the Treasury, said wealth was already taxed in Britain.
The Institute for Fiscal Studies and Resolution Foundation have separately called for some form of CGT and income tax equalisation, typically conditional on allowing for a fair return on the original investment, a design detail absent from Streeting’s public framing so far.
For investors, the practical concern is friction. The hurdle to sell and reinvest becomes materially higher, the firm said, raising the risk of inertia and leaving portfolios more exposed to concentration risk over time.
“That is the central risk with aligning CGT to income tax,” Griffin said. “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.”
