BLOG: Burnham’s threat to increase Capital Gains Tax

Andy Burnham has been dropping some strong hints that he would like to increase the rate of Capital Gains Tax (CGT). He has suggested that, in the interests of fairness, it should be increased to the same rate as Income Tax. It could mean an increase from 24% to 45%.

The arguments for and against this were aired extensively last year, but all the points that were made then seem to have been forgotten. In short, it is a terrible idea which would raise little, if any, additional tax, would be grossly unfair to investors and business owners and would inflict huge damage on the economy.

Impact on business owners

Imagine that you are a salaried manager of a letting agency and you are thinking of starting your own business. A typical salary for the manager of a business that turns over £1million a year would be around £100,000. Let’s compare this to their earnings as the business owner.

Very few independent letting agents have a profit margin of more than 15%. This means that the owner would get £150,000 a year. In return for the extra £50,000 per year, he or she will probably have had to give a personal guarantee for a bank loan and another personal guarantee to the landlord of their premises.

If things go wrong they could lose everything. If the rate of Capital Gains Tax that they pay when they eventually sell the business does not reflect the risk they have taken, they will not be prepared to take the risk of opening their own business.

Another important factor to consider is that a large element of most CGT will be due to the impact of inflation, so in the interest of fairness, this should be taken into account and deducted from the gain before the tax is levied.

Timing matters

The biggest issue, however, is that while the salaried manager has no choice about when they get their salary, the investor or a business owner is usually able to decide when to take their capital gain.

This is why a huge number of business owners rushed to complete their sales in the months before the last budget in November 2025 and again in the months before the end of the tax year in April 2026.

This is why an increase in CGT rates is unlikely to generate any additional tax. If it increases any further then business owners and investors will decide not to realise their capital gain and the Government will get 45% of ‘nothing’.

All we can hope for is that our new Government reads the research that was prepared on this subject last year and decides to leave CGT rates as they are.

Adam Walker is a business sales broker who has specialised in the property sector for more than 35 years.