Rachel Reeves will not change the rate of capital gains tax on the sale of holiday homes in the Budget due to concerns about the impact on the property market.
Ministers have decided to allow CGT to be charged on the sale of holiday homes and buy-to-let properties amid concerns that increasing it would cost money, the Times reported.
In the last Budget the Conservatives cut the top CGT rate for property from 28% to 24%. The Office for Budget Responsibility said at the time that the cut would raise almost £700 million by increasing the number of property sales and resulting stamp duty revenue.
Now the ministers are worried that it would cost the exchequer money to raise the rate again by slowing property sales, the Guardian understands.
Keir Starmer has indicated that CGT on the sale of shares and other assets, currently set at up to 20%, will rise in the Budget on 30 October. The tax is expected to increase by several percentage points.
Only around 350,000 people a year pay the tax, but they contribute around £15 billion in tax revenue, according to figures from the Institute for Fiscal Studies.
The Institute for Public Policy Research (IPPR) said interviews it had conducted with millionaires suggested most would not be put off investing by a rise in CGT.
One, Julia Davies, told IPPR that she had “never let tax rates dictate my decisions to fund innovation or pursue opportunities”, while Photobox co-founder Graham Hobson said the claim that increased CGT would discourage investment was “simply a myth “.
“Withholding tax was equal to income tax when I set up Photobox. That didn’t stop me from starting and growing a successful business,” Hobson said.
The Treasury is considering changes to inheritance tax and pension tax relief. Reeves is drawing up plans for £40bn of tax rises and spending cuts to avoid the real cuts to departments that were baked in under the last government’s plans.
It emerged this week that several cabinet ministers have written to Starmer to contest planned cuts to their department.
The chancellor is also looking at increasing the social insurance contributions paid by businesses. The Guardian revealed this month that Reeves was considering levying NI on employers’ pension contributions, which think tanks say could raise £12-£17bn.
Increasing business NI contributions will be controversial and has sparked a backlash from industry groups who have called it a tax on jobs, but Starmer and Reeves have refused to rule it out.
The Prime Minister told the BBC that Labor was “very clear in the manifesto that we would not increase tax on working people”, but that he had made no commitment on employers’ NOR contributions.
There is also growing speculation that Reeves will increase fuel duty for the first time since 2011, when it was frozen by George Osborne.
Bridget Phillipson, the education secretary, told broadcasters on Thursday that the government had “some really tough choices” to make.