John Healey stokes capital gains tax raid 'speculation' ahead of Budget

Chancellor John Healey has stoked "speculation" about a capital gains tax (CGT) rise at the forthcoming Budget after drawing attention to Britain's comparatively low rates.

Speaking to journalists during this year's Labour Party Conference, Mr Healey noted that the UK had the "lowest (CGT) of any European G7 nation".

Mr Healey insisted he did not wish to provide "any answers or signals that will fuel Budget speculation," but his reference to the UK's position on capital gains taxation has only intensified debate about what the Budget will contain.

Defence Secretary Wes Streeting and First Secretary of State Louise Haigh have both made the case that higher capital gains tax rates would create a fairer system while generating additional revenue for the Treasury.

Their position is bolstered by analysis from the Centre for Analysis of Taxation, which published a note suggesting that targeted CGT reforms could bring in an extra £20billion by 2030.

Former Institute for Fiscal Studies (IFS) director Paul Johnson has criticised the proposals, arguing that raising CGT would ultimately result in diminished tax receipts rather than a windfall for the Exchequer.

Forecasting revenue from capital gains is notoriously difficult because investor behaviour shifts in response to tax changes.

The Office for Budget Responsibility (OBR) acknowledged last year that uncertainty surrounding CGT income projections was "very high".

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Tax advisory firm Blick Rothenberg has similarly warned that its clients may choose to cling to assets for longer or alter their investment strategies if rates go up.

Currently, the UK levies CGT at 18 per cent and 24 per cent depending on income bands. Italy, France and Germany all impose higher flat rates, while Canada taxes top earners more heavily. Japan and the US maintain lower rates.

Mr Healey kept a lid on pre-Budget rumours after a wave of leaked stories ahead of last year's fiscal statement drew sharp criticism from leading economists, among them former Bank of England deputy governor Andy Haldane.

He emphasised his ambition to "raise the levels of business investment, business confidence [and] business profit in this country".

The Chancellor also disclosed that Gordon Brown, who serves as a Government envoy for global finance, sends him late-night text messages offering economic guidance.

Dan Coatsworth, head of markets at AJ Bell, shared: "Speculation that CGT rates could rise at the Budget may encourage some investors to bring forward plans to sell investments held outside ISAs and pensions.

"While no changes have been announced, the prospect of higher future tax rates could lead some investors to realise gains sooner rather than later.

"CGT rate increases, if implemented, could come into force immediately, creating a change midway through the tax year."