Streeting calls for equal tax on income and capital gains in Labour leadership pitch

A wealth tax plan would equalise tax on assets and income by aligning capital gains tax rates with income tax bands. The current system taxes capital gains at lower rates than income, which is described as unfair and as penalising work. The plan aims to address widening wealth and opportunity gaps and a growing divide between earned and unearned income. An example contrasts a worker paying higher tax on salary with a landlord paying less tax on rising house value. Proposed capital gains tax rates would mirror 20%, 40%, and 45%, with bands calculated by combining income and asset profits. Estimates suggest revenue could reach around £12bn to £14bn annually, while supporters argue it would improve productivity by discouraging investment in less productive businesses.

"Streeting said the current system in which capital gains tax is generally much lower than income tax was not fair and penalised work. The wealth gap in this country has widened, the opportunity gap in the country is widening and the gap between earned income and unearned income has also widened, he told the BBC's Political Thinking podcast. Laying out part of his pitch for the leadership of the Labour party, Streeting told Nick Robinson that the plan could raise up to 12bn a year."

"He used the example of a woman in Lancashire who paid a higher rate of tax on her salary than her landlord paid for the growing value of the house she rented. She slogs her guts out, he puts in far less effort, yet the state rewards him more than her. And we wonder why people are angry, he said. The system is penalising work. It's not fair and it's bad for our economy. We need a wealth tax that works."

"Under the existing system, higher or additional rate taxpayers pay 24% on gains they make on capital in the current financial year. Under Streeting's proposals, capital gains tax rates would mirror the three bands of income tax of 20%, 40% and 45%, with a person's capital gains tax band calculated by adding up their income and profits from assets. A 2024 report by the Centre for the Analysis of Taxation estimated that changing capital gains tax under its proposed plan could raise 14bn."

"Critics of raising capital gains tax argue that it could result in capital flight, discourage investment, or because the tax is paid on sale encourage investors to hold on to assets. But Streeting said there was a good pro-business, pro-growth, pro-productivity argument in his proposals because the current system encouraged investment in less productive businesses."

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