Mark Campbell, head of wealth planning at Isio, says speculation over possible capital gains tax reform is already influencing behaviour, with some investors and business owners considering asset sales before any policy has been confirmed.
“Recent speculation that a future Andy Burnham government could align Capital Gains Tax (CGT) rates with income tax has prompted some investors and business owners to consider bringing forward asset sales before any potential changes. While no formal policy has been announced, the rumours have once again highlighted how uncertainty alone can shape taxpayer behaviour.
“It’s worth remembering that we’ve been here before. Speculation over potential CGT increases has been something of a Budget tradition in recent years, so this is not a new story. The concern is that people may make significant financial decisions based on rumour, rather than confirmed policy. We are already seeing some individuals crystallise gains early to pre-empt changes which may never materialise, often leaving them worse off than if they had adhered to their original plans.
“At the same time, such behaviour can bring forward tax receipts for HMRC. The cynic might argue that if speculation alone encourages people to pay tax earlier than planned, it delivers a short-term boost to the Treasury without any formal policy change. If that’s the case, it feels like a very underhand way of increasing revenues.
Potential impact on growth
“We also need to remember that Capital Gains Tax is, to a large extent, voluntary. Individuals must only pay it when choosing to dispose of an asset. Push rates too high and there is a real risk that individuals defer disposals , reducing transactions, slowing investment and potentially generating less tax than expected.
“Any reform of CGT must strike the right balance. While raising revenue is important, so too is maintaining incentives for investment, entrepreneurship and economic growth. Tax policy should encourage sensible long-term decision-making, not drive behaviours based on political speculation.
