Key facts
- Hargreaves Lansdown and three other UK investment platforms warned against raising capital gains tax.
- The platforms argue a CGT hike could deter retail equity investment.
- Current CGT rates for individuals are 18% and 24%, depending on taxable income.
- The annual exempt amount for CGT in the 2026-27 tax year is £3,000.
- CGT receipts reached a record £24.2 billion in the 2024-25 tax year, with 584,000 taxpayers.
- Investors have some control over when gains are realized, potentially delaying sales in response to higher rates.
Hargreaves Lansdown, alongside fellow investment platforms AJ Bell, interactive investor, and Quilter, has cautioned UK Chancellor John Healey against increasing capital gains tax (CGT) in the upcoming Budget. The firms argue that such a move could discourage retail equity investment, potentially undermining the government's stated aim to foster a stronger retail investment culture and direct more household capital towards productive assets.
Current CGT rates for individuals stand at 18% and 24%, depending on their taxable income, with an annual exempt amount of £3,000 for the 2026-27 tax year. Gains on assets held outside tax-efficient wrappers like ISAs and pensions can incur a tax liability upon sale.
Hargreaves Lansdown has observed a modest increase in investors realizing gains in Fund and Share Accounts, attributing it to speculation surrounding potential CGT changes ahead of the 2024 Budget. AJ Bell echoed this sentiment, suggesting that uncertainty over higher CGT rates might prompt some investors to realize gains before the October 28 Budget, particularly for assets held outside ISAs and pensions with gains exceeding the annual allowance.
Interactive investor highlighted the significant revenue already generated from CGT, citing HMRC data that showed receipts reached a record £24.2 billion in the 2024-25 tax year, with 584,000 individuals paying the tax. Quilter's tax specialists questioned the potential revenue increase from further reforms, noting that Treasury receipts were already rising under the current system and suggesting that any changes should consider how taxpayers might alter their behavior, such as delaying sales.
The core of the debate lies in investor behavior, as CGT is typically triggered upon asset disposal, giving investors some control over crystallizing gains. A higher rate might not automatically translate to increased revenue if investors respond by deferring sales, restructuring portfolios, or increasing their use of tax-efficient wrappers. For investment businesses, these shifts can lead to concentrated trading activity, increased demand for specific transactions like Bed and ISA, and a higher volume of customer inquiries.