Chancellor John Healey has dismissed calls from within his own party to increase Capital Gains Tax (CGT) ahead of next week's Budget. The decision signals the government's intention to prioritize wealth creation and investment over raising revenue from asset sales.

This move comes despite previous support for a CGT increase from prominent Labour figures, including Cabinet ministers Wes Streeting and Louise Haigh, who had advocated for aligning CGT rates closer to income tax. The current CGT rates stand at 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. The tax is levied on profits made from selling assets like shares or second homes.

Chancellor Healey has indicated a preference for policies that encourage profit and investment within the UK. He stated his desire for the country to be a "country of wealth creation" and for government decisions to "raise the levels of confidence, and investment, and profit in British business." This aligns with a speech he gave last month, emphasizing the importance of business profitability.

Concerns have been raised that increasing CGT could lead to unintended consequences, such as wealthy individuals relocating or delaying asset sales, potentially costing the government more in lost revenue than it gains. HMRC estimates suggest that a 1% increase in the lower CGT rate could raise £5 million by 2028-29, but a 10% increase in the higher rate could reduce Treasury receipts by £3.6 billion in the same period, partly due to behavioural changes.

Influential figures, including former government adviser Lord Jim O'Neill, had warned that raising CGT would send a negative signal to the business community. Haigh, before her appointment as First Secretary of State, had argued in a journal article that higher CGT could shift the tax burden away from earned income towards unproductive capital, provided genuine investment returns were protected.

Defence Secretary Wes Streeting had previously called for a "wealth tax that works" and argued for equalizing CGT with income tax to address perceived unfairness. However, Healey had reportedly ruled out levelling the two tax rates, according to a recent Financial Times report.

When questioned about the government's plans for CGT, Communities Secretary Angela Rayner declined to speculate on Budget details. She defended the government's approach, stating that steps had already been taken to provide financial relief and support the cost of living, implicitly rejecting suggestions that the decision was a victory for the wealthy.

Senior banking executives had reportedly anticipated tax increases from Healey, though the specific focus on CGT has now been clarified. The Chancellor's decision underscores a strategic choice to foster an environment conducive to capital growth and retention within the United Kingdom.