Lord Kinnock Advises Burnham to Raise Capital Gains Tax

Lord Kinnock has advised Prime Minister Andy Burnham to consider aligning Capital Gains Tax rates with Income Tax rates.

He argued that taxing profits from assets more like earnings from work could generate approximately £12 billion in additional annual revenue.

However, this is a policy recommendation rather than a confirmed government measure.

HM Treasury has not announced a Capital Gains Tax increase, and any decision would need to be formally presented by Chancellor John Healey, potentially at the Budget scheduled for 28 October 2026.

The potential revenue is also disputed. Investment platform IG estimates that full rate alignment could instead reduce receipts by approximately £7.8 billion a year if investors respond by delaying asset sales.

This is a private-sector estimate, not an official Treasury forecast.

What Capital Gains Tax Change Has Lord Kinnock Recommended?

The latest Lord Kinnock tax policy advice concerns the difference between the taxation of employment income and profits made when assets are sold.

Capital Gains Tax, commonly shortened to CGT, can apply when someone disposes of an asset that has increased in value.

Depending on the circumstances, affected assets may include investment properties, shares held outside tax-protected accounts and business interests.

Lord Kinnock reportedly urged Andy Burnham’s government to align CGT rates with Income Tax rates, arguing that the change would make the system fairer and raise approximately £12 billion in additional revenue.

The intervention was originally reported in The Telegraph’s coverage of Lord Kinnock’s CGT proposal.

The central argument is that a pound earned from selling an appreciating asset should not automatically face a lower headline tax rate than a pound earned through employment.

Supporters of alignment generally argue that it could:

• reduce the tax advantage attached to receiving profits as capital rather than income;
• make the treatment of different forms of economic gain more consistent;
• generate revenue for public services;
• discourage arrangements designed mainly to convert taxable income into capital gains.

The proposal nevertheless remains political advice. Lord Kinnock is not responsible for setting tax rates, and his recommendation does not alter current law.

What Are the Current UK Capital Gains Tax Rates?

For the 2026–27 tax year, the main individual Capital Gains Tax rates are:

• 18% where taxable gains fall within the person’s available basic-rate band;
• 24% where gains fall above that band.

An individual normally receives a £3,000 Annual Exempt Amount, meaning CGT is generally calculated on net taxable gains above that allowance after relevant losses and reliefs have been considered.

The allowance was £12,300 in 2022–23 before being reduced in stages.

Qualifying gains covered by Business Asset Disposal Relief are also taxed at 18% for disposals made from 6 April 2026, subject to the detailed eligibility rules.

How Do Those Rates Compare With Income Tax?

The headline Income Tax rates used in the alignment proposal are:

These main rates apply to relevant income in England, Wales and Northern Ireland.

Scotland has separate rates and bands for non-savings, non-dividend income, which would create an additional policy-design question if the government pursued full alignment.

Alignment could therefore produce only a modest increase for gains currently charged at 18%, but a much larger increase for gains currently charged at 24%.

Has the Government Agreed to Raise Capital Gains Tax?

No. There has been no confirmed decision to align CGT and Income Tax rates.

In a parliamentary answer published on 13 July 2026, the Treasury said that the tax system remained under review and that tax policy decisions would be taken by the Chancellor at the Budget.

It did not announce plans to adopt full rate alignment.

Chancellor John Healey is scheduled to present his first Budget on Wednesday 28 October 2026. HM Treasury has confirmed the date, but it has not confirmed that a CGT increase will form part of the statement.

The official announcement can be read through HM Treasury’s confirmation of the October Budget.

Until a policy is formally announced and supported by legislation, current CGT rates and allowances continue to apply.

Would Aligning Capital Gains Tax Raise £12 Billion?

The £12 billion figure should be treated as an estimate attached to the policy argument, not as guaranteed government revenue.

The eventual result would depend on several factors, including:

• which CGT rates were increased;
• whether existing reliefs were retained;
• whether inflationary gains received special treatment;
• how business disposals and reinvestment were treated;
• whether taxpayers brought sales forward or delayed them;
• changes in asset prices and transaction volumes.

CGT is normally charged when a gain is realised, usually through a disposal.

Taxpayers may therefore be able to postpone the charge by retaining an asset rather than selling it. Economists commonly describe this response as a “lock-in effect”.

Official HMRC tax-costing methodology incorporates behavioural responses because a higher rate does not necessarily produce a proportionate increase in revenue.

Why Does IG Estimate a £7.8 Billion Revenue Loss?

Investment platform IG has published an alternative analysis suggesting that full alignment could reduce annual Treasury receipts by approximately £7.8 billion.

Its estimate assumes that substantially higher rates would cause some investors and property owners to delay disposals, reducing the volume of taxable gains.

That figure must also be treated cautiously:

• it is not an official HM Treasury or Office for Budget Responsibility costing;
• it depends on assumptions about taxpayer behaviour;
• it may not reflect every exemption or safeguard that could accompany a final policy;
• no detailed government proposal exists against which the estimate can be tested.

The two competing figures therefore illustrate the uncertainty rather than establishing a definitive financial outcome.

How Much Does Capital Gains Tax Currently Raise?

In its July 2026 parliamentary response, the Treasury said CGT currently raises approximately £14 billion a year.

It also said receipts were expected to more than double to approximately £35 billion by 2030–31 under the existing forecast.

This forecast does not mean that a further rate increase would automatically raise more money.

Receipts can vary substantially because they depend on asset markets, the number of disposals, business sales and decisions about when gains are realised.

The Treasury would therefore need to assess both the direct effect of higher rates and the likely behavioural response before adopting Lord Kinnock’s recommendation.

What Are the Arguments for Aligning CGT With Income Tax?

Supporters present alignment primarily as a question of fairness and tax neutrality.

Two people can experience a similar increase in financial resources but face different headline rates depending on whether the amount is classified as employment income or a capital gain.

That difference may also create opportunities for people with flexible remuneration arrangements to favour capital treatment.

The Institute for Fiscal Studies has previously supported aligning marginal tax rates across different forms of gains and income.

However, it has argued that higher CGT rates should form part of broader reform to the tax base rather than being introduced as an isolated rate increase.

A wider reform could examine the treatment of inflation, losses, business investment, death, reinvestment and different types of assets.

What Are the Arguments Against Raising CGT?

Critics argue that a substantial increase could affect investment decisions and reduce the number of taxable transactions.

Possible concerns include:

• investors retaining assets for longer to defer tax;
• business owners postponing company sales;
• reduced incentives to invest money where capital is at risk;
• greater complexity if numerous exemptions are needed;
• volatile revenue that may fall below initial projections.

Former Chancellor Jeremy Hunt has argued that the existing 24% rate may already be close to the revenue-maximising level because taxpayers change their behaviour when rates rise.

IG has made a similar argument through its behavioural analysis.

These concerns do not prove that every CGT increase would reduce revenue.

They show why the design of the tax base, reliefs and commencement rules could matter as much as the headline rate.

How Could CGT Alignment Affect an Investor?

Consider a simplified example involving an individual who makes a £50,000 gain and can use the full £3,000 annual exemption.

The taxable gain would be:

£50,000 − £3,000 = £47,000

Assuming the entire amount were charged at one rate:

At 45%, the illustrative bill would be £9,870 higher than at 24%.

This is not a personal tax calculation. In practice, the result may depend on taxable income, available basic-rate band, allowable losses, acquisition and disposal costs, asset type, reliefs and the exact wording of any future legislation.

What Details Would a Government Proposal Need to Address?

A credible reform would require considerably more detail than simply substituting one set of rates for another.

Important questions would include:

Would All Gains Be Aligned?

The government would need to decide whether alignment applied to every taxable asset or whether special rates remained for qualifying business disposals and other categories.

Would Inflation Be Recognised?

Some gains reflect general price inflation rather than an increase in real purchasing power. Policymakers could consider an inflation allowance, although this would add complexity.

Would Reinvestment Receive Relief?

Relief could potentially be provided where proceeds are reinvested in a business or another qualifying productive asset.

When Would New Rates Begin?

A Budget announcement does not always mean an immediate change. The commencement date, transitional rules and treatment of contracts already agreed would need to be specified.

How Would Scotland Be Treated?

Because Scotland has different Income Tax bands for some income while CGT is a UK tax, the meaning of “alignment” would need to be clearly defined.

What Should Investors and Business Owners Do Before the Budget?

No one should assume that CGT rates will rise simply because Lord Kinnock has recommended a change.

Before making a significant disposal, individuals and business owners can take sensible administrative steps:

• retain accurate acquisition, improvement and disposal records;
• identify available capital losses and relevant reliefs;
• distinguish confirmed tax law from Budget speculation;
• consult a qualified tax adviser before accelerating or postponing a major transaction.

Selling an asset solely in response to an unconfirmed report may create transaction costs, investment risk or an unnecessary tax liability.

The appropriate decision will depend on the asset owner’s circumstances and the final legislation, if any.

Final Takeaway

Lord Kinnock’s advice has intensified the debate over whether earnings from assets and employment should face similar tax rates.

His reported proposal is based on a fairness argument and carries a claimed revenue benefit of approximately £12 billion a year.

But the policy has not been adopted, the £12 billion figure is not an official Treasury forecast, and alternative modelling suggests substantially higher rates could reduce receipts by discouraging asset sales.

The next important date is 28 October 2026, when Chancellor John Healey is due to deliver the Budget.

Until an official announcement is made, the current main CGT rates of 18% and 24%, together with the £3,000 annual exemption, remain in force.

Frequently Asked Questions

What tax change has Lord Kinnock recommended?

Lord Kinnock has recommended aligning Capital Gains Tax rates more closely with Income Tax rates.

This could mean increasing the main CGT rates from 18% and 24% towards rates of 20%, 40% and 45%, depending on the final design.

Why does Lord Kinnock support higher CGT rates?

He argues that profits from selling assets should not be taxed substantially less than earnings from employment and that alignment could raise approximately £12 billion for the Treasury.

Has Andy Burnham accepted Lord Kinnock’s advice?

No formal acceptance or confirmed policy has been announced. Tax decisions are expected to be set out by Chancellor John Healey at fiscal events.

When is John Healey’s first Budget?

HM Treasury has scheduled the Budget for 28 October 2026.

What is the CGT allowance for 2026–27?

The individual Annual Exempt Amount is £3,000 for the 2026–27 tax year.

Could raising Capital Gains Tax reduce government revenue?

It is possible. Higher rates may encourage some taxpayers to delay disposals, reducing the number of realised gains. However, the scale of any response is uncertain and would depend on the policy’s structure.

Will the proposal affect business owners?

It could if the government changed the taxation of business disposals or Business Asset Disposal Relief. No such reform has yet been confirmed.