Capital gains tax equalisation is back in the political conversation. In June 2026, as Labour leadership manoeuvring continues, senior figures have floated aligning capital gains tax (CGT) rates with income tax rates. Wes Streeting has proposed it as part of a wider wealth-tax pitch. Andy Burnham, campaigning in the Makerfield by-election, has long argued the UK has “overtaxed labour and undertaxed wealth”.
None of this is law. There is no Bill, no Budget measure, no commencement date. But the idea is serious enough to warrant attention. If you own a business, hold investment property, or have a share portfolio outside an ISA, the gap between today’s CGT rates and income tax rates is large. Closing it would change the maths on any disposal.
This post explains what equalisation means, why the history matters, and why it’s worth a conversation now rather than after an announcement.
What Capital Gains Tax Equalisation Actually Means
Right now, CGT and income tax sit at very different rates. Most chargeable gains are taxed at 18% within the basic rate band and 24% above it, following the increases that took immediate effect on 30 October 2024. There’s no additional CGT rate. The top rate on a gain is 24%, however large the gain.
Income tax works differently. It runs at 20%, 40% and 45%, and the 45% additional rate bites on income above £125,140. Equalisation would import that band structure onto your gains.
Here’s why that’s worse than it first sounds. A gain is stacked on top of your income, so a large one-off disposal climbs through the bands fast. A salary sits steadily across the bands year after year, with only a slice in the additional rate. A business sale doesn’t. The whole gain lands in one tax year, so it can blow through 40% and sit largely at 45%.
Base cost makes it sharper still. A founder who built a company from nothing has almost no cost to deduct. Nearly the entire sale proceeds are chargeable gain. So the figure pushed into the top band is the bulk of what you sell for, not a thin margin on top of it. The annual exempt amount is just £3,000, frozen until 2030, so it barely registers against a disposal of any size.
The political proposals also talk about closing routes that let people take income as gains, while protecting “genuine” entrepreneurs. The detail of any such carve-out matters enormously. We don’t have it.
A Worked Example: A £2m Business Sale
Take a founder who sells their company for £2m. They built it from nothing, so the base cost is negligible. Almost the whole £2m is a chargeable gain. Assume their salary already uses the basic rate band, and set BADR aside for the moment.
Under today’s rules, the gain is taxed at 24%. On roughly £2m, that’s about £480,000.
Now apply equalisation, with gains taxed at income tax rates. A sliver falls in the lower bands, but the gain quickly passes £125,140 and the bulk sits in the 45% additional rate. The bill lands near £880,000.
That’s roughly £400,000 more on the same sale. The figures are illustrative and rounded, and your own position would depend on income, reliefs and timing. But the direction is the point. Equalisation doesn’t nudge the bill. It can almost double it.
This Has Been Tried Before
Equalisation isn’t a new idea. It’s how the UK system worked for two decades.
In his March 1988 Budget, Conservative Chancellor Nigel Lawson aligned CGT rates with income tax rates. He paired the change with indexation, so only gains above inflation were taxed. That regime held until 2008, when Labour Chancellor Alistair Darling replaced it with a flat 18% rate. George Osborne later introduced a 28% higher rate in 2010.
So a return to alignment would, in effect, reinstate the Lawson system. The Centre for the Analysis of Taxation (CenTax) has framed its own equalisation proposal in exactly those terms, paired with a new investment allowance.
What the history doesn’t settle is the revenue effect, and that’s where it gets contested.
Why the Revenue Argument Is Contested
Here’s the disagreement that sits underneath the politics.
One camp argues that high CGT rates suppress receipts. On this view, people simply hold assets rather than sell, so a higher rate raises less than the arithmetic suggests. Lower rates, by contrast, free up disposals and lift revenue. Supporters point to the period after 2008.
The other camp, including CenTax’s HMRC-data research, argues the opposite. They say low CGT rates mainly encourage people to repackage income as capital gains, which costs the Exchequer elsewhere. Their modelling estimates a reform package could raise around £14bn even after behavioural change. That’s an estimate, and it covers a full package rather than equalisation alone, but it shows the scale of what’s at stake.
You don’t need to resolve that debate to see the point. Both sides agree behaviour responds sharply to the rate. And that response is exactly what creates risk and opportunity for anyone sitting on a gain.
Why This Is Harder Than It Looks
The temptation, when a tax rise is rumoured, is to act fast. Bring the sale forward. Crystallise the gain. Beat the change.
History shows people do exactly that. When a rate rise is signalled, disposals spike beforehand as taxpayers “forestall” — locking in the lower rate while they still can. The trouble is that acting on a rumour can be as costly as ignoring it.
Consider the traps. A disposal brought forward purely for tax can fail other tests, or trigger a charge you’d otherwise have deferred. Business Asset Disposal Relief now stands at 18% on qualifying gains, up from 14%, following the rise on 6 April 2026. It carries a £1m lifetime limit and strict conditions on ownership and shareholding. Reliefs like gift hold-over, rollover and incorporation each carry their own rules. Get the sequencing wrong and a relief you assumed was available may not apply.
There’s also the simple fact that none of this is law yet. Selling early to avoid a tax that never arrives has its own price. The judgement is genuinely difficult. It depends on your timetable, your other income, and the structure of the asset.
Who Should Be Paying Attention
If you’re a business owner within a few years of selling or winding up, this matters most. The gap between 24% today and a possible 45% on much of the gain is life-changing money, and the timing of your exit is one of the few levers you control.
It also matters if you hold buy-to-let property, a second home, or significant shareholdings outside tax wrappers. A move toward income tax rates would reshape the after-tax return on assets you may have held for years.
Speculation isn’t a reason to panic. It is a reason to understand your position before any decision is forced on you.
How Hamlyns Can Help
We model the numbers, not the rumours. Our job is to show you what a disposal looks like under the current rules, and what it would look like if the rates moved.
We bring personal tax and business tax together in one conversation. We check which reliefs apply to your situation and in what order. We handle the reporting, the deadlines and the HMRC interaction. And we tell you plainly when waiting is the better call than acting.
If you’re weighing a sale, or simply want to understand how capital gains tax equalisation could affect your position, please get in touch with the Hamlyns team. You can read more about how we support owners through a disposal in our guide to preparing a business for sale, or explore our business tax and personal tax services. We’ll give you a clear view in plain English, well before any decision needs making.
