21 May 2026
If you are covering the news that Wes Streeting is proposing aligning income tax and capital tax, please see the following comment from Rachael Griffin, tax and financial planning expert at Quilter:
Wes Streeting’s proposal, as part of his leadership campaign, to align capital gains tax (CGT) with income tax would represent a significant shift in how investment returns are treated, but how investors respond would ultimately determine whether it would raise the revenue expected.
Equalising rates at up to 45% for additional rate taxpayers would markedly increase the cost of selling assets such as shares and second homes. At those levels, the incentive to realise gains weakens, raising the risk of a lock‑in effect where investors delay or avoid disposals altogether. It may also entrench a ‘hold until death’ mindset, as investors defer sales to benefit from the capital gains uplift on death, further undermining the tax take.
Recent data shows just how sensitive CGT is to both markets and policy. Receipts reached £22.2 billion in 2025–26, up from £13.7 billion the previous year and well above the previous peak of just under £17 billion. Strong asset prices have played a role, but policy changes have clearly amplified this, with the annual exemption cut sharply and rates already increased in 2024.
However, this surge looks heavily influenced by timing. Investors appear to have brought forward disposals to crystallise gains under a changing regime. Once that passes, activity may slow as higher tax rates take hold and investors adjust behaviour.
That is the central risk with aligning CGT to income tax. Higher rates change behaviour. Investors may hold assets for longer, defer rebalancing decisions or rely more on tax wrappers. Over time, that can suppress transaction levels and make tax receipts more volatile rather than consistently higher.
There are wider consequences for the economy. CGT plays an important role in recycling capital, and if higher rates discourage disposals, capital becomes more static. In the housing market this could limit supply and reduce mobility among second home owners and landlords. Across investment markets, it can leave portfolios less aligned to changing conditions.
From a financial planning perspective, the shift would introduce greater tax friction. The hurdle to sell and reinvest becomes materially higher, increasing the risk of inertia and leaving investors more exposed to concentration risk over time.
