UK Finance Minister Faces Tough Choices on Wealth Taxes Ahead of October Budget

British finance minister John Healey is under pressure to raise billions of pounds in new taxes in his first budget, scheduled for October 28. The challenge is to fund Prime Minister Andy Burnham's pledges on social care and defence while adhering to Labour's promise not to increase the main rates of income tax, VAT, corporation tax, or social security contributions.

Government forecasts from March showed a narrow £24 billion headroom to meet the target of balancing day-to-day spending with tax revenue by 2029-30. Many economists believe that margin has since shrunk, increasing the urgency for new revenue measures.

Capital Gains Tax

Capital gains tax (CGT) raised £24 billion in the 2025-26 tax year. The previous finance minister, Rachel Reeves, had already raised rates to 18% for basic-rate taxpayers and 24% for higher-rate payers. These rates remain below income tax levels of 20% and 40%. Defence minister Wes Streeting, who was once a potential leadership rival to Burnham, has suggested aligning CGT rates with income tax. The Institute for Public Policy Research has made a similar proposal.

A comprehensive reform, as estimated by the University of Warwick's Centre for the Analysis of Taxation in August 2025, could raise an extra £11 billion annually. Such a reform would include ending the exemption on CGT at death, introducing a tax-free allowance for normal investment returns, and taxing unrealised gains on emigration. However, the tax office cautioned in June 2025 that a 10-percentage-point rise in the higher CGT rate could actually reduce revenue by up to £3.6 billion a year due to increased avoidance.

Property Taxes

Council tax, an annual levy on property occupiers, generates £54 billion a year, while stamp duty on property purchases brings in £17 billion. Council tax is based on 1991 property valuations, which means revaluation would shift the burden significantly toward London and southern England. Stamp duty is widely seen as inefficient because it discourages mobility and downsizing.

Oxford Professor Ben Ansell has proposed a 0.65% property value tax to replace both council tax and stamp duty. Before becoming prime minister, Burnham was listed as a supporter of a similar proposal by the Fairer Share campaign for a 0.48% levy. However, in July, Burnham ruled out scrapping either tax at the October budget. He instead backed plans to charge extra council tax from 2028 on homes valued above £2 million.

Wealth Tax

Oxfam and Tax Justice UK have called for a 2% annual levy on assets over £10 million, which they estimate could raise £24 billion a year. Burnham has not ruled out such a tax but said he wants to take time before deciding. The Institute for Fiscal Studies warns that annual wealth taxes are difficult to implement due to challenges in valuing private businesses and the risk of emigration or avoidance, which could reduce long-term revenue.