Labour is said to be exploring the idea of aligning CGT with existing income tax rates. This proposal follows ongoing policy discussions in anticipation of future reform, but no final decision has been announced.
The review considers how changing CGT rates could affect government revenues and impact different taxpayer groups, especially individuals selling investments or property.
Current Capital Gains Tax Rates
At present, capital gains tax for individuals stands at 18 percent for basic-rate taxpayers and 24 percent for higher-rate taxpayers, applicable to gains above the annual exemption of £3,000 for the 2025/26 tax year.
These rates apply to gains realised on the sale of assets such as investment properties. HM Revenue and Customs recorded CGT receipts of £13.6 billion in 2025.
Comparison with Income Tax Rates
In contrast, income tax rates in the UK currently stand at 20 percent for basic-rate taxpayers, 40 percent for higher-rate taxpayers, and 45 percent for those in the additional-rate band.
The disparity between capital gains and income tax rates has been an ongoing topic in taxation debates, especially regarding fairness and fiscal impact.
Proposals from Policy Groups
The reported draft policy originates from discussions among Labour policy groups, including the Labour Growth Group and Good Growth Foundation think tank.
These groups have suggested that aligning CGT with income tax could be paired with reductions in some income tax rates. Funding for such reductions could potentially be raised through higher CGT, changes to land taxes, and reforms to council tax structures.
Possible Impacts on Landlords
If implemented, these proposals could increase tax obligations for landlords and individuals who sell property, particularly those falling into higher or additional income tax bands.
The property sector and investor groups have expressed concern that increased CGT may discourage investment and complicate the market for buy-to-let owners. The potential policy is viewed as part of a wider review of taxation fairness and fiscal sustainability.
Timeline and Next Steps
A more detailed policy report is expected after the May local council elections. Current discussions are at the consultation stage, with no formal commitments made by Labour’s senior ministers.
Shadow Chancellor Rachel Reeves has repeatedly emphasised the importance of progressive tax reform but has not publicly endorsed these specific changes.
Final Summary
Labour’s assessment of capital gains and income tax alignment marks a significant possible shift in the UK’s tax landscape, with the aim of rebalancing tax fairness and raising additional revenues.
While no decisions have been finalised, the review could signal substantial changes for property owners and investors in future fiscal years. Stakeholders await further clarity, with a full report expected in coming months.
For those seeking comprehensive updates and tools for tax planning, platforms such as the Pie app offer timely support.
