Chancellor John Healey has decided not to increase the capital gains tax (CGT) in the upcoming budget scheduled for October 28, despite calls from senior Labour figures to raise the tax. Treasury sources indicated that the potential drawbacks of increasing CGT—such as wealthy individuals deferring asset sales or relocating assets abroad—played a significant role in the decision.

Capital gains tax is levied on profits earned from the sale of assets that have appreciated in value, including properties and shares. The government had been under pressure from cabinet members including Louise Haigh, the first secretary of state, and Defence Secretary Wes Streeting to raise the tax rate. Both Haigh and Streeting, who had positioned themselves in discussions regarding Labour’s leadership succession, argued that aligning CGT with income tax rates would create a fairer system. Streeting described the existing framework as facilitating a growing disparity between earned and unearned income, labeling his proposed reform a “wealth tax that works.”

In contrast, Healey has emphasized a policy focus on encouraging wealth creation without imposing additional penalties on investment returns. In a recent speech, he highlighted the need to address rising business costs driven by energy prices, regulatory burdens, and labor expenses, asserting that the long-term solution lies in economic growth rather than higher taxation. Healey underscored his commitment to fostering confidence, investment, and profitability within British business sectors.

With the decision to maintain the current CGT thresholds, Healey is instead expected to target the profits of the UK’s major banks as a primary source of additional revenue in the forthcoming budget. The four largest lenders—HSBC, NatWest, Barclays, and Lloyds Banking Group—have collectively reported approximately £200 billion in pre-tax profits over the past five years, bolstered by rising interest rates. The proposed levy on bank profits intends to capitalize on these strong earnings.

The budget will also reflect a willingness on Healey’s part to reduce the fiscal headroom previously established by former Chancellor Rachel Reeves. Borrowing costs across the UK and other major economies have surged recently, leading analysts to suggest the government’s financial cushion against Labour’s fiscal rules—which stood at £24 billion following the spring forecast—could be cut by as much as half.

The upcoming budget is anticipated to strike a balance between supporting economic growth and securing additional government revenues amid volatile borrowing conditions, while deferring controversial CGT reforms for the foreseeable future.