UK's Healey rules out capital gains tax rise in October 28 Budget

UK Chancellor John Healey has ruled out raising capital gains tax in his first Budget, due on October 28, 2026, according to reports published on October 19 and 20 that cite Treasury sources. Capital gains tax is the tax on the profit made when an asset such as shares, a second home or a business is sold. Instead of raising it, the Chancellor is expected to rely on a levy on banks to pay for his plans, the reports said.

Capital gains tax sits at the centre of a long argument in British politics about how to tax wealth. Supporters of a rise say it is fair for profits from assets to be taxed closer to the rate paid on wages. Opponents say high rates on gains discourage investment and lead people to hold on to assets rather than sell them, so that the government can end up collecting less. Healey's decision, as reported, sides with the second argument: the warning he received was that a higher rate could cost the Treasury money rather than raise it.

The choice also narrows the Chancellor's options. Having ruled out the three biggest taxes, VAT, National Insurance and income tax, and now capital gains tax, he is left with targeted measures. The banking sector is the main one. One estimate in reports is that restoring the bank surcharge, an extra tax on bank profits that now stands at 3% after being cut from 8%, would raise about £2 billion a year. The final design of any levy has not been announced, and earlier this month the International Monetary Fund advised the UK to look at pensions and welfare spending rather than lean on a bank tax.

There is also a political point. The pressure for a rise came from within the governing Labour Party, including ministers who now sit in the cabinet. Ruling it out before the Budget signals that the Treasury wants to calm investors and wealthy taxpayers, even at the cost of disappointing some of its own MPs.

For Indian readers, the decision matters mostly through people and money that cross between the two countries. Indian-origin residents of the UK, Indian businesses with British operations and investors holding UK shares or property face no change in the rate on their gains for now.

UK capital gains tax: where things stand before the October 28 Budget Item | Position, according to reports Basic-rate capital gains tax | 18%, no rise planned Higher-rate capital gains tax | 24%, no rise planned Equalising with income tax | rejected Main new revenue source | levy on banks Use of bank levy money | temporary cost-of-living support

Short-term: Investors and people planning to sell shares, second homes or businesses in the UK no longer face a rush to sell before October 28 to avoid a higher rate, if the reports are confirmed on Budget day. Bank shares may come under pressure as attention moves to the levy.

Long-term: Keeping gains taxed below income could support investment and asset sales in the UK, but critics will argue it leaves the tax system less fair and puts more of the burden on banks and other sectors. Whether the bank levy is temporary or lasting will shape the UK's appeal as a financial centre.

Who is affected: UK taxpayers with investments or property, business owners planning to sell, British banks and their shareholders, households who may receive cost-of-living support, and foreign investors, including Indian ones, with assets in the UK.

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