Chancellor John Healey has reportedly ruled out increasing capital gains tax (CGT) rates in the October Budget, despite pressure from some Labour ministers and MPs to do so, potentially easing investor concerns.

The decision follows speculation that the government could increase the higher-rate CGT rate from 24% or bring it closer to income tax rates of 40% and 45%. Treasury analysis reportedly suggested a rate increase could reduce revenues by encouraging investors to defer asset sales, restructure holdings or leave the UK.

Lord O’Neill of Gately, who has advised Andy Burnham, told The Times that “raising capital gains tax would send very much the wrong message to business”.

The biggest revenue-raising measure set to be in the Budget is an increase in the rate banks pay on their profits, which is expected to fund cost-of-living support for households and businesses.

The reported decision offers some relief to investors, but the final Budget could still include other changes to the tax treatment of investments. Attention is also turning to alternative revenue-raising measures, including a possible increase in the banking surcharge.

Anthony Whatling, managing director at Alvarez & Marsal Tax, said: “If confirmed, this would be a very welcome decision and a much-needed signal of stability for business owners and investors. Fears of a capital gains tax rise have already prompted a rush to complete deals ahead of the Budget, with uncertainty driving decisions that should be led by commercial considerations. Higher rates risk deterring transactions and ultimately reducing Treasury revenues. Keeping rates unchanged would help restore confidence and give business owners greater certainty to invest and plan for the future. It is just a pity that the Chancellor did not make this clear months ago”

Sarah Coles, head of personal finance at AJ Bell, said the decision, if it stands to be, could prevent investors from making hasty decisions to realise gains ahead of potential tax changes.

"Investors will be pleased to see the end of those potentially damaging Budget rumours, at least for now. Not raising the rate is probably a sensible move from a tax revenue perspective. The August tax receipt figures were a useful reminder that for this particular tax, tightening the screw doesn’t always raise more money for the public finances," Coles said.

According to Coles, CGT receipts had fallen compared with the previous year, suggesting earlier reductions in the annual exempt amount and increases in rates on shares and other financial assets had not generated the expected additional revenue. Investors had instead brought forward disposals before changes took effect or deferred gains afterwards.

However, she cautioned that ruling out a rate increase did not necessarily mean CGT would remain unchanged. The chancellor could still consider reducing the annual exempt amount further or removing it altogether, although this could discourage investment outside individual savings accounts (ISAs) and self-invested personal pensions (SIPPs).

Isabella Galliers-Pratt, senior investment director at Rathbones, added: “The Chancellor's decision to reject calls for an increase in Capital Gains Tax will come as a relief to many investors who have spent months wondering whether they could face a significantly larger tax bill when selling assets. In recent months, we've seen a noticeable increase in conversations with clients concerned about the prospect of higher CGT rates, particularly business owners, landlords and long-term investors seeking advice on whether they should bring forward asset sales ahead of the Budget.

"However, the announcement shouldn't fundamentally alter how people approach long-term financial planning. Rather than trying to second-guess future Budgets, investors are generally better served by focusing on the opportunities already available to them. ISAs and pensions remain highly effective tax-efficient wrappers, while couples may also benefit from considering spousal transfers as part of a wider financial planning strategy.

"While the Chancellor has ruled out a rise in Capital Gains Tax for now, the burning question now is where the government turns next. The UK's public finances remain under pressure and ministers face difficult decisions as they seek to fund spending priorities while maintaining fiscal discipline. That means uncertainty around the longer-term direction of tax policy is unlikely to disappear entirely. The temptation is to react to every Budget rumour, but successful investing is rarely about predicting the next tax announcement."

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