The Chilling Effect of tax hike rumours

Tom Entwistle comments:

Why are Andy Burnham's CGT rumours already reshaping the property market?

We discovered the damaging effects of property tax hike rumours during the months-long run-up to Rachel Reeves's two tax-grabbing budgets.

So, here we go again. This time another prime minister (not yet confirmed but everyone knows it’s a done deal) with another agenda, though surely he can’t stray too far away from Labour’s election manifesto, can he?

Nevertheless, the signs are that Burnham has a major devolution agenda that must be funded, most likely through increasing taxes yet again.

So far Andy Burnham has not published a tax manifesto. He has not been confirmed as prime minister and has not personally endorsed a single figure for a new rate of capital gains tax (CGT). 

But over the last couple of weeks since Keir Starmer's resignation on 22 June 2026, tax advisers up and down the country have reported a marked increase in landlords, developers and business owners consulting them. They want to know about moving to crystallise gains before a budget that has not yet even been scheduled. 

There’s a gaping gap between what is rumoured, the actuality as to what is being proposed and how the market is already behaving. That’s the real story here, and it is one that anyone who owns, lets or invests in property is concerned with.

Uncertainty is the enemy of business and investment, and a rumour not debunked is almost as bad as a rumour confirmed. Uncertainty is its own kind of tax. When the direction of travel looks certain enough, even without legislation, rational owners will bring forward decisions they might otherwise never have taken or delayed for years. 

That is exactly the scenario we’re in now, and it carries consequences for transaction volumes, rental supply and the wider economy that go well beyond whatever the eventual policy turns out to be.

What’s actually being proposed

It is worth trying to be precise about who has said what, because the coverage has not always been consistent. Burnham himself has not called for capital gains tax to be aligned with income tax. That specific proposal, which would take the top rate from 24 per cent to 45 per cent, has come from his one-time leadership rival - Wes Streeting.

Streeting has described this as a wealth tax that finally works in the economy's favour. Louise Haigh, the former transport secretary and a close Burnham ally, understood to have orchestrated his election victory, has separately called for CGT to move closer to income tax rates and for the uplift on main residence property values, currently reset to base cost, to have their gains taxed.

Andy Burnham's own team, according to a report in The Times, is said to be examining more targeted changes. For example, revisiting the rates charged on share sales, second homes and other assets, potentially to help fund the removal of green levies from household bills. 

He is known to have long backed a land value tax as a replacement for council tax and stamp duty. None of these amount to settled policy, and no proposal has been announced by Burnham's own camp, but the rumour, undenied, is what brings “the chilling effect". 

When senior figures around a probable prime minister are all sounding out in the same broad direction – tax assets more, tax income and landlords – we are fully entitled to treat the signal as worth planning around. 

One senior cabinet minister, the Work and Pensions Secretary Pat McFadden, kind of “let the cat out of the bag” as to Labour’s taxation direction: He had expressed in a leaked private WhatsApp message in May 2025 that every meeting he had had with Labour MPs revolved around asking, “Who can we tax in [more] order to pay benefits to others?”

What’s the current CGT position?

It is easy for rumour to outrun fact on this subject, so the current rates are worth revisiting. For individuals, Capital Gains Tax is charged at 18 per cent for basic-rate taxpayers and 24 per cent for higher and additional-rate taxpayers on both residential property and other assets. 

The two were revised in the October 2024 Budget, having previously been taxed at lower rates. The annual tax-free allowance, known as the annual exempt amount, is £3,000 for the 2026/27 tax year, having been cut drastically from £12,300 as recently as 2022/23. 

Business Asset Disposal Relief, which applies to qualifying business and share disposals, now stands at 18 per cent from 6 April 2026, up from 14 per cent the previous year, subject to a £1 million lifetime limit. Companies do not pay capital gains tax at all. Corporate gains are taxed under corporation tax instead.

Full alignment of CGT with income tax, taking the top rate to 45 per cent, would leave the UK with the highest headline capital gains tax rate of any developed economy. That fact alone should give pause to anyone assuming alignment is a straightforward or costless move for the exchequer.

What are the likely effects of alignment?

Aligning Capital Gains Tax (CGT) with income tax rates changes behaviour; it changes how money moves in the economy. It will inevitably result in less risk-taking, reduced investment in private assets and thereby fewer rental properties and fewer business startups.

Capital Gains Tax (CGT) is a tax charge on the profit made when selling an asset for more than its purchase price, less any expenses. Income tax is the charge on regular wages up to 45 per cent, so aligning the two means treating all wealth equally. It therefore removes any advantage of investing over working.

Assets will become locked in. Investors will likely hold on to existing assets in the hope that some future government will reverse any alignment with income tax rates.

In addition, to avoid steep tax bills, there will be an even greater shift to tax shelters than has already happened. Wealth will inevitably move into tax-exempt vehicles like trusts and offshore life insurance.

All of this will have the effect of slowing down market activity, the very opposite of what the government has stated is a priority – economic growth.

Investors are already reacting

The behavioural shift is not speculative. It’s a reaction being reported directly by the advisers who are currently handling it:

Anthony Whatling of Alvarez & Marsal Tax has described investors as accelerating sale completions specifically because of concerns about what a change of prime minister could mean for their businesses.

Ed Wood of Rathbones has cited clients who had planned to realise gains over the next couple of years are now bringing those plans forward, calling it, in many cases, a low-risk decision either way. 

Robert Salter of Blick Rothenberg Accountants goes further. He notes that some entrepreneurs are actively discussing and contemplating a move to a non-UK tax residence to reduce their exposure, ahead of a major transaction.

Michael O’Shea, chief executive of investment firm Premier Miton, which manages £9bn of client money, told the Daily Telegraph: “Uncertainty is stifling. Businesses delay investment, consumers postpone spending and investors sit on their hands. The longer uncertainty persists, the greater the economic cost.”

At LandlordZONE, Editor Helen Gregory reported last month, using HMRC's own receipts data, that landlords were already timing disposals around their tax position rather than holding indefinitely. 

This behaviour pattern sits alongside, and is compounded by, other pressures already driving landlords out of the sector since the Renters' Rights Act came into force on 1 May 2026. 

Compliance complexity and costs, tighter possession rules and the ongoing MEES timeline for energy efficiency give more pause for thought. A landlord weighing up an exit for these reasons, now has an additional incentive to act sooner rather than later, simply to avoid the risk of selling into a higher CGT rate.

The 2024 precedent

We have a precedent for this type of behaviour and its effects on tax revenue. The evidence from previous CGT tax rate increases does not support the claimed increase in tax revenue of £14 billion after alignment.  

In her first budget, Rachel Reeves raised the top rate of capital gains tax from 20 per cent to 24 per cent on property, a move she said kept the UK's rate the lowest of any European G7 economy. 

Despite this increase, overall CGT receipts subsequently fell. As reported by the Financial Times, taxpayers simply chose not to realise gains rather than pay tax at the new, higher rate.

Therein lies the central weakness in any plan to raise capital gains tax significantly to fund new spending commitments. Unlike income tax, CGT is largely a tax of choice. Nobody is compelled to sell an asset in any given tax year. 

When the rate rises, or is expected to rise, the rational response is often simply to wait, hold on, or restructure ownership. Not to sell and pay more. Any government tax policy built around revenue estimates risks generating considerably less than forecast. At the same time, real damage is done to transaction volumes and the wider economy.

Wider cost, slower transactions and slower growth

All this matters for reasons that go beyond individual landlords' tax bills. Property transaction taxes, by their very nature, discourage transactions. Stamp Duty Land Tax (SDLT) and the SDLT premium charged on investment property are equally a drag on the market, enough to change behaviour. 

Fewer disposals mean less housing stock moving between owners. It means less portfolio rebalancing, less capital available for reinvestment in new housing stock or improved existing stock. This is housing which is desperately needed. 

With a private rented sector already shrinking under the weight of regulatory and compliance pressure, any additional disincentive to buy, sell or refurbish will reduced supply.

Paradoxically, when the government gives an incentive to sell in a rush, before it has a chance to change the tax rates, it adds volatility to a market that most participants, tenants included, just don’t want. 

The lesson from the 2024 CGT increase, and from stamp duty behaviour more generally, is that transaction taxes tend to slow down the economy rather than simply redistributing wealth within it – they reduce the size of the pie. 

A government genuinely focused on economic growth should weigh that dynamic carefully before treating property-owner capital gains tax as a straightforward source of additional revenue.

If Andy Burnham has political and economic sense, he will dispel these rumours of CGT alignment right now. The last thing businesses and investors need is another 6 months of uncertainty running up to an autumn budget.

What can landlords do now?

For those landlords and property owners watching this saga unfold, the sensible response is neither to panic nor be complacent.

• Don’t make decisions that are irreversible. Selling a property, you would otherwise have kept purely based on newspaper speculation about policy that’s not confirmed. 
• If you have a sale already planned for other reasons, get professional advice on timing rather than assuming the current rates will still apply by completion.
• Remember there’s a 60-day reporting and payment window that already applies to UK residential property disposals, regardless of any future rate change.
• Watch out for the first budget of a Burnham government. This is the actual decision point. The Minister's personal views and newspaper articles are not legislation.
• Keep a file for each property which records the property purchase and acquisition costs. Carefully record and keep invoices for all capital expenditure (improvements) and any reliefs already claimed. 

A final thought

Whether or not a Burnham government ultimately raises capital gains tax or aligns it with income tax as Wes Streeting and others have proposed, the uncertainty of the past fortnight has already changed how landlords, developers and business owners are behaving. 

Government ministers should remember that rumours and credible signalling about property taxation can move markets just as effectively as legislation itself. They should act quickly to dispel unfounded rumours.

Disclaimer: This article is provided for general information purposes only and does not constitute legal, financial or tax advice. All policy references relating to a potential Burnham government are based on speeches, interviews and reported briefings, not confirmed legislation, and may change or fail to materialise. Landlords and property owners should seek independent professional advice before making any decision based on its content.