PolicyLens

Green - Tax

Align CGT with income tax

Tax capital gains at income-tax rates while reforming reliefs.

Last updated: May 2026.

Read the policy-specific methodology note

Policy baseline

The Green manifesto proposes taxing income from wealth more like income from work. CGT alignment has high lock-in risk.

  • Targets capital gains and asset owners.
  • Behavioural responses are large.
  • Inflation and entrepreneurship relief details matter.

Core trade-offs

The direct beneficiaries are the exchequer and horizontal tax fairness. The costs fall mainly on asset owners and some entrepreneurs. The main economic question is realisation behaviour may erode receipts.

  • The exchequer and horizontal tax fairness gain most directly.
  • Costs fall mainly on asset owners and some entrepreneurs.
  • Key risk: realisation behaviour may erode receipts.

Fiscal impact by 2028-29

-GBP 25.0bn to -GBP 2.0bn. Central estimate: -GBP 12.0bn.

  • Positive numbers mean net fiscal cost; negative numbers mean Exchequer savings.
  • Main channel is the scored tax, spending or delivery change.
  • Offsets depend on tax receipts, behaviour and pass-through.
  • Range reflects uncertain implementation and economic response.
  • This is not an official costing.

Economic impact by 2028-29

  • Jobs: Little direct job effect; sector-specific taxes can reduce hiring in affected industries.
  • Wages: Legal taxpayers may shift costs to workers, owners or consumers over time.
  • Prices: Some pass-through likely where market power or fixed demand exists.
  • GDP / productivity: Usually mildly negative before spending use; stronger if investment or mobility responses rise.

Assessment

This is a real trade-off, not a free gain. The exchequer and horizontal tax fairness benefit, while asset owners and some entrepreneurs bear most costs. Overall output depends on behaviour, capacity and pass-through.

Confidence: Medium-low. Higher on the policy target and fiscal channel; lower on behaviour, pass-through and economy-wide effects.

Main risks

  • Behavioural response: Avoidance, timing and relocation can reduce receipts.
  • Incidence uncertainty: Legal taxpayers may shift costs to workers, consumers or investors.
  • Investment risk: Higher taxes can reduce investment where returns are mobile.

Safeguards

  • Use HMRC microsimulation before legislating.
  • Close avoidance routes before rate rises.
  • Review receipts and investment annually.

Academic evidence

Mirrlees and review team, Institute for Fiscal Studies, 2011

Tax by Design

Efficient tax systems should avoid narrow bases and poorly targeted reliefs that distort decisions.

Useful benchmark for judging tax-base changes and exemptions.

Tax by Design (2011)

UK government evidence

Green Party of England and Wales, 2024

Green manifesto

The manifesto defines the tax, spending, climate, housing and public-service proposals modelled here.

Used to define the scenario, not as an official costing.

Manifesto for a Fairer, Greener Country (2024)

HMRC, 2025

HMRC ready reckoners

HMRC publishes direct-effect tax-change estimates but warns large reforms are not simple linear scalings.

Anchors tax-yield scale and supports wider uncertainty ranges.

Direct effects of illustrative tax changes (2025)

Institute for Fiscal Studies, 2024

IFS Green reaction

IFS judged Green tax and spending plans very large and difficult to deliver at claimed yields.

Supports sceptical revenue and behavioural assumptions.

Green Party manifesto: a reaction (2024)

Sources

Other Green policies

PolicyLens estimates are illustrative and should not be treated as official costings.