Reeves weighs capital gains tax increase to 39 per cent

Rachel Reeves is being warned that a massive hike in capital gains tax could endanger her hopes of creating economic growth.

- DAVID MADDOX

A row has broken out over claims that the chancellor has asked Treasury officials to model capital gains tax rates of 39 per cent and 33 per cent, well above the second home rate of 24 per cent.

While sources close to Ms Reeves have tried to dismiss Budget speculation and allegations of disarray, the concerns have dropped at a time of intense pressure for the chancellor and Sir Keir Starmer. It follows:

• The Institute for Fiscal Studies warning that she will need to raise £25bn in extra taxes to meet Labour’s spending commitments

• Labour support dropping to less than 30 per cent in Techne UK’s weekly tracker poll for the first time in more than two and a half years as voters turn their backs on the new government

• Starmer repeatedly refusing to rule out a hike on employer contributions to national insurance – a move critics believe will destroy jobs

• Persistent question marks over Labour plans to tax nondoms and add VAT to private school fees

• Criticism that Reeves should have held her first Budget sooner

The row over capital gains was broken in The Guardian, which claimed to have seen papers on modelling requested by Ms Reeves on an increase of up to 39 per cent. A source close to the chancellor dismissed the story and denied the government was in “disarray” over its tax plans, adding that they would “not be drawn on Budget speculation”.