Key facts
- Proposals from Andy Burnham's allies suggest equalizing capital gains tax with income tax at 45%.
- This potential change aims to tax wealth accumulation similarly to income, with proponents arguing it would raise £14bn.
- Financial advisors are seeing increased client interest in accelerating sales and realizing gains.
- Entrepreneurs are exploring faster business sale completions and some are considering relocating to avoid UK capital gains tax.
- Past tax changes, like Rachel Reeves' increase to 24%, have led to taxpayers delaying sales and a lower overall tax take.
Entrepreneurs and investors are rushing to sell assets and businesses in anticipation of potential tax changes under Andy Burnham's prospective government. Allies of Burnham have proposed equalizing capital gains tax (CGT) with income tax, which would raise the top rate from 24% to 45%. This move is seen by proponents as a way to tax unproductive capital accumulation and generate an estimated £14 billion for the Exchequer.
Financial and tax advisors report a significant increase in client inquiries and a push to accelerate the completion of business sales and investment transactions. Founders are reportedly nervous about the potential impact of a change in leadership on their tax liabilities, with some considering crystallizing gains under the current regime despite the risks. Some high-net-worth individuals are also looking to bring forward the sale of long-standing investments.
Proposals from figures like Louise Haigh and Wes Streeting advocate for taxing wealth at a similar rate to income, with Haigh arguing it would shift the tax burden away from labor and towards capital. Such a change would make the UK's CGT rate the highest among developed economies. However, historical data suggests that significant tax hikes can lead to behavioral responses, such as investors delaying sales, which can ultimately reduce overall tax receipts, as seen after Rachel Reeves' previous increase in the CGT rate.
Some entrepreneurs are also exploring options to minimize their UK tax liability by considering becoming non-UK tax residents, particularly if large corporate transactions are anticipated in the near future. This trend of individuals relocating for tax-related factors has reportedly been observed over the past couple of years.