Chancellor Rachel Reeves reportedly plans to announce an increase in capital gains tax (CGT) on shares and other assets but not on second properties, in the upcoming autumn budget.
The Times reported that it had been told that CGT, which is levied on the profits made from the sale of assets, on shares is likely to be raised by "several percentage points". The higher rate of CGT on shares stands at 20%.
However, Reeves will reportedly leave the rate of CGT on the sale of second properties, which goes up to 24%, untouched.
A spokesperson for the Treasury was not available to respond to Yahoo Finance UK's request for comment at the time of writing.
There has been much speculation about what policy changes Reeves will announce in her first budget on 30 October, as she seeks to raise funds to fill a gap in public finances.
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Reports on Wednesday said that Reeves had identified a £40bn shortfall in funding ahead of the statement in two weeks' time.
An increase in CGT rates has been one route that Reeves was rumoured to be taking.
CGT raises around £15bn a year, according to the Institute for Fiscal Studies, which is less than 2% of total tax revenue and is paid by less than 1% of the adult population.
Last week, the Guardian reported that Reeves was considering hiking CGT to as high as 39%. However, prime minister Keir Starmer dismissed the suggestion that rates would be raised that high, in an interview with Bloomberg Television at the UK's International Investment Summit in London on Monday.
He said that this was "getting to an area which is wide of the mark", but did not offer any more detail.
While there has been fears over the impact of potential changes, research has suggested that increasing CGT will not lead to lower investment, slower growth or reduced entrepreneurship.
An analysis from the Institute for Public Policy Research (IPPR) found "CGT is not a primary driver of investment decisions. Entrepreneurs and investors alike focus much more on issues such as access to financing, market opportunities and broader economic conditions."
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In response to reports that a CGT increase would focus on shares and other assets, Russ Mould, investment director at AJ Bell, said: "If the rate change does happen, the most important thing for markets will be whether it comes into immediate effect on 30 October or the start of the new tax year."
"If investors have time to plan, we could see a steady trickle of portfolios being reshaped up until 5 April 2025 when the tax year ends, and that might weigh on markets over the next five or so months if there is a constant stream of selling," he explained. "That could cause frustration among investors but also present buying opportunities if certain stocks have temporarily been depressed."
On the flip side, Mould added that change in CGT rates "should encourage more people to maximise their ISA allowance so they shelter their capital gains from the taxman.
"We might also see greater interest in venture capital trusts where CGT can be avoided by meeting certain conditions.”
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