Chancellor John Healey has abandoned plans to introduce a wealth tax on investments after Treasury officials warned that the measure could lead to significant revenue losses. The proposal, which involved raising capital gains tax (CGT) rates to match income tax levels for top earners, would have nearly doubled the CGT rate from 24 percent to 45 percent for higher-rate taxpayers.

While supporters, including some Cabinet ministers and trade union leaders, argued that the increase was a straightforward way to generate additional government revenue by targeting the wealthy, official estimates suggested otherwise. According to HM Revenue and Customs, a 10-percentage-point increase in the higher CGT rate could reduce tax revenues by more than £3.5 billion annually as investors engage in tax avoidance strategies.

One Treasury insider noted that, despite its apparent appeal, past attempts to raise CGT rates were abandoned because the anticipated revenue gains did not materialize. Another official described the plan as "bat s*** crazy," highlighting skepticism within the department. The decision to drop the wealth tax follows a similar retreat over a proposed lower threshold for the mansion tax, which Mr. Healey has scaled back from £1.5 million to £2 million.

Shadow Chancellor Andrew Griffith criticized the government’s approach, urging Healey to avoid tax increases and focus instead on controlling welfare expenditure amid record-high tax burdens. Despite shelving the more ambitious tax hike, Mr. Healey has not ruled out implementing a smaller increase in CGT rates in the forthcoming budget.

Former Conservative Chancellor Sir Jeremy Hunt reinforced the caution, stating that chancellors are routinely advised that CGT at 24 percent maximizes revenue, with rates beyond that point likely to reduce overall tax intake. The development underscores the ongoing tension between ambitious fiscal policies aimed at wealth redistribution and the practical limits imposed by taxpayer behavior and economic incentives.