Labour contemplating elevating private tax allowances in increase to low paid employees

Prime Minister Andy Burnham is reviewing proposals to pay for an increase in the personal allowance by gradually bringing capital gains tax in line with income tax

Labour is considering cutting income tax for lower earners by raising capital gains tax (CGT). Prime Minister Andy Burnham is reviewing proposals to pay for an increase in the personal allowance by gradually bringing CGT in line with income tax.

Labour donor and Ecotricity owner Dale Vince suggested the idea in a submission to the Treasury. He called for funding a rise in the threshold by both hiking CGT and ending interest payments on Bank of England reserves.

Both measures combined would raise the money needed to increase the personal allowance to £15,570 from its current £12,570, which has been frozen since 2021.

Mr Vince said the existing system was “backwards” and demanded ministers “put money into the pockets of the people who will spend it” to jumpstart the economy.

He said: “We’ve spent years squeezing people at the bottom while handing billions to the banks and allowing wealth to be taxed more lightly than work. That’s backwards.

“If Labour wants to get the economy moving, it should put money into the pockets of people who will spend it. Raising the personal allowance to £15,570 would give millions of people a meaningful boost, with the biggest benefit going to those on the lowest incomes. We can pay for it by making the tax system fairer – starting with capital gains and the billions we currently hand to banks in interest.”

Chancellor John Healey has said both affordability and wealth creation will be key priorities in his first Budget on October 28. A Treasury spokesperson said: “Decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”