The Chancellor risks a Tory rebellion if he pushes up capital gains tax threatening investors’ incomes, a leading Conservative MP has warned ahead of next week’s Budget.
“If you were going to align income tax rates to capital gains tax, I think it would be extremely problematic on Conservative back benches,” said Mel Stride, chairman of the Treasury Select Committee.
Capital gains are currently taxed at between 10pc and 28pc, compared to income tax, which ranges from 20pc to 45pc.
It is thought that Rishi Sunak could consider closing the gap, because of fears it is unfair, and because small companies could try to classify more income as capital gains to benefit from the lower rate.
Mr Stride said a wider revaluation of tax rates could also be worth considering: “If you are going to get lots of pieces now in play, as is quite possible across the tax terrain, I think the Government should try and grapple with some of these tax reform issues that it has ducked in the past, if it possibly can,” he told a Resolution Foundation event.
Corporation tax could also be hiked, with Mr Sunak understood to be considering reversing much of his party’s work to cut the rate, which has fallen from 28pc in 2010 to 19pc today.
He could hike it as high as 25pc, grabbing an extra £18bn from businesses – something the Labour party opposes.