Author: David Thurlow
Chartered Financial Planner and Investment Manager - Member of the Investment Committee
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Published: October 2025
The fiscal black hole may become a contender for the most used terminology by Labour Government and has shaped intense speculation on how the government intend to fill the void. With long-term borrowing likely being ruled out due the cost of borrowing being at its highest level since 1998, it has led to intense scrutiny on what tax announcements will appear on 26 November 2025. Labour looks to stand firm and stick with their manifesto of “not taxing the working people” but looks as though the definition of “working people” is becoming increasingly nuanced by the day.
No wealth tax to come, officially
Labour’s promise to rule out rises on income tax rates, VAT, and employee contributions leaves little room for manoeuvre for Chancellor Rachel Reeves to raise £22 billion in revenue, which makes the likes of Capital Gains Tax (CGT) a potential source for increasing tax receipts. The Chancellor recently ruled out a “wealth tax” at the Labour Conference but interestingly highlighted that the UK already has wealth taxes in place – namely CGT and Inheritance Tax (IHT) – suggesting that further reform may not be necessary but instead changes to these taxes could be due.
A Brief History of CGT
In 1965, CGT was introduced by Labour Chancellor James Callaghan to ensure that profits from asset sales didn’t escape taxation. Over the years there have been changes to the CGT where most notably in 1988, Conservative Chancellor Nigel Lawson aligned CGT with income tax rates, tying gains to an individual’s marginal rate – a move that reinforced CGT’s role as a wealth tax. Currently it is 18% for basic rate tax payers and 24% for higher and additional rate tax payers, with the CGT annual exemption allowance falling to a mere £3,000 for individuals.
What Could Change on CGT?
It’s a crystal ball when determining what will be the new rule, as each potential change leaked into the press is met by backlash of equal measure. Possible areas are as follows:
- CGT Rates – Potential increases could impact higher earners.
- CGT Allowances – Reductions have taken place over the years and may be subject to further changes.
- Interspousal Transfers – Currently exempt, but this position could be reconsidered.
- Carry forward of losses – Rules around offsetting past losses may tighten.
Labour requires immediate avenues of tax receipt making the increase in CGT a potential candidate. We saw from the Autumn Budget 2024 that CGT rates changed overnight, highlighting the immediate changes the Government can make.
What Should Investors Do?
With uncertainty ahead, seeking professional financial advice is essential. Here at MM Wealth, we review CGT positions as part of wider planning for our clients such as utilising available allowances.
It is important you seek advice from an experienced adviser before taking any action to ensure you are taking the right step to meet your objectives. Speculation can be just speculation!
We are always here to help you with any questions or concerns you may have. If you would like to talk to one of our Chartered Financial Planners, please contact us on 01223 233331 or email info@mmwealth.co.uk.
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Disclaimer
Opinions constitute our judgment as of this date and are subject to change without warning. This article is for general information only and does not constitute advice. All contents are based on our understanding of current taxation and legislation, which is subject to change.
The information in this article is not intended as an offer or solicitation to buy or sell securities or any other investment, nor does it constitute a personal recommendation.
The Financial Conduct Authority does not regulate estate planning and tax planning.
