Chief executives of major UK investment platforms have cautioned against further increases in capital gains tax (CGT), warning that such moves could deter savers from participating in the stock market and undermine government efforts to boost domestic investment.

CGT, which is levied on profits from selling assets including shares, businesses, and second homes, saw its higher rate rise from 20 percent to 24 percent in the 2024 Budget. Alongside this, the annual tax-free allowance was reduced by half to £3,000. These changes have sparked concern that additional hikes might follow, despite the Labour government’s pledge not to raise taxes on working individuals.

Executives from key wealth management firms argue that increasing CGT would contradict the government’s goal of encouraging retail investment across the UK. Matt Benchener, CEO of Hargreaves Lansdown, noted that while the government aims to get more Britons investing, raising the tax on capital gains would work against this objective. He highlighted that roughly £600 billion remains in idle cash holdings, losing value to inflation, and that raising CGT would further deter potential investors.

Michael Summersgill, chief executive of AJ Bell, echoed these concerns, suggesting that the government’s tax policies are hindering efforts to build a retail investing culture. He urged policymakers to simplify tax regulations and promote long-term investing rather than imposing additional costs and regulatory complexity.

Richard Wilson, CEO of Interactive Investor, emphasised that increasing CGT could diminish incentives to take investment risks, support businesses, and accumulate wealth over time. He warned that raising the tax during a period when the government seeks economic growth might send a discouraging message to millions of savers and investors whose capital fuels the economy.

Some industry representatives also questioned the assumption that higher CGT rates would translate into increased government revenue. Steven Levin, CEO of Quilter, pointed out that investors might respond by delaying the sale of assets to avoid tax liabilities, potentially reducing overall tax income. He argued that any policy adjustments should consider their broader effects on investment activity, entrepreneurship, and the UK’s competitiveness in attracting capital.

There is additional concern that elevated CGT levels might shift investor preference away from shares toward government bonds, known as gilts, which are exempt from capital gains tax. Peter Hargreaves, co-founder of Hargreaves Lansdown, warned that if investing for growth becomes less advantageous, savers may turn to low-yield but CGT-free gilt investments.

The warnings come ahead of the upcoming Budget, as government officials weigh the balance between fiscal needs and fostering an environment conducive to investment and economic growth.