Rachel Reeves set to raise capital gains tax rate on sales of shares in Budget

Rachel Reeves is planning to increase the rate of capital gains tax on shares sales but not on properties such as second homes, it was reported today.

The Chancellor will use her Budget to implement a raft of tax raising measures to close a funding gap now estimated at £40 billion a year.

Capital gains tax - levied on profits of more than £3000 made on the sale of assets such as shares - has long been in the sights of Reeves as Labour has ruled out rising the rates on the biggest revenue raisers including income tax, corporation tax, VAT and worker’ National Insurance.

However, she has also been warned off big increases in capital gains tax rates by business leaders who fear it will stifle the entrepreneurial innovation that the Starmer government needs to kick-start growth.

It is also easily avoided by simply delaying selling up and deferring the “gain.”

According to reports in The Times today Reeves will go for relatively modest hikes in CGT rates on shares, perhaps only by “several percentage points” from the current levels of 10% for basic rate taxpayers and 20% for everyone else.

Government sources have suggested that such a move would bring in extra revenue in the “low billions.”

A relatively small increase in the rate would probably be enough to allay fears of a stampede of share sales ahead of any increase. However, tax advisers say they have been approached by large numbers of clients in recent months asking for advice on speeding up disposal plans.

According to The Times the Chancellor will leave the rate on the sale of properties such as second homes and buy-to-lets unchanged at 24%. Capital gains tax is not levied on the sales of primary dwellings.

Other exemptions include the sale of assets held in self invested personal pensions (SIPPs) or ISAs.

More than half of all capital gains relates to shares and only 12% to property.