Labour’s unrealised capital gains tax does not exist. The UK government has not enacted a tax on unrealised capital gains, and no bill introducing one is before Parliament. What Labour has done since taking office in 2024 is raise existing capital gains tax rates and shrink the annual tax-free allowance, and those moves have fuelled a wider debate about whether taxing “paper profits” could follow. Proposals from tax policy groups, academics, and some Labour-aligned MPs sketch how such a tax might work, generally targeting individuals with assets above £10 million. None of that is law.
What Labour Has Actually Changed to CGT
In the October 2024 Autumn Budget, the government raised capital gains tax rates across the board. The lower rate for basic-rate taxpayers went from 10% to 18%, and the higher rate from 20% to 24%. From 6 April 2025, those rates apply to most chargeable assets, including residential property. Carried interest, relevant to investment fund managers, is taxed at 32%. The annual exempt amount sits at £3,000 for the 2025–26 tax year, down from £12,300 two years earlier.1GOV.UK. Capital Gains Tax: What You Pay It on, Rates and Allowances
None of this taxes unrealised gains. UK capital gains tax still bites only when you sell, gift, or otherwise dispose of an asset. The increases matter because they show a clear willingness by this government to extract more from investment wealth, which is what makes the unrealised gains debate feel less theoretical than it once did.
What Taxing Unrealised Gains Would Mean
Under the current system, you could hold shares that have tripled in value for twenty years and owe nothing until you sell. A tax on unrealised gains would treat the annual increase in an asset’s value as a taxable event even though no sale has happened. You would owe tax on growth that exists only on paper.
The approach targets what economists call tax deferral: the ability of wealthy individuals to accumulate large investment gains while paying no tax on them, sometimes for decades, because the gain only becomes “real” for tax purposes at disposal. Some investors arrange their affairs so that never happens during their lifetime. Periodic checkpoints where appreciation must be accounted for would close that gap.
The practical problem is obvious. If your wealth is tied up in a private company or a commercial property, you may not have the cash to pay a tax bill on value you haven’t actually received. This liquidity issue is the central objection to every unrealised gains proposal and the reason most designs include high thresholds, deferral options, or instalment arrangements.
Who the Proposals Would Target
The most prominent UK proposals focus on individuals with net assets above £10 million. An Early Day Motion in Parliament, signed by multiple MPs, called for an annual wealth tax of 2% on individual assets exceeding that threshold, estimating it could raise £24 billion a year.2UK Parliament. Proposal for a Wealth Tax
A separate academic proposal focused on property suggested replacing Council Tax in the top two bands with an annual 0.5% levy on property value for UK taxpayers, paired with a deferral scheme for asset-rich, cash-poor pensioners.3University of Oxford. Expert Comment: A Property Wealth Tax Is Now Politically Feasible
The LSE Wealth Tax Commission, which published a detailed report on how a UK wealth tax could be designed, recommended a one-off wealth tax rather than an annual one. The Commission declined to recommend specific rates or thresholds, calling those matters of political judgement. It did recommend that all types of wealth be included in the tax base and that professional valuations, deferral schemes, and instalment options be built into the design to handle liquidity constraints.
The common thread is the £10 million floor. At that level, fewer than 200,000 individuals in the UK would likely be affected, which is why proponents frame it as a tax on extreme wealth rather than a broad-based measure. Whether the mechanism is a flat percentage of total wealth, a tax on annual appreciation, or a hybrid varies by proposal. No version has reached the stage of a formal government consultation or draft legislation.
Which Assets Would Be Covered
Most proposals cast a wide net. Publicly traded shares, bonds, and funds would be straightforward to include because exchange prices set their value every trading day. Private company interests would also fall within scope despite the harder valuation problem they create. Commercial property, secondary residential holdings, and other investment real estate feature in virtually every version of these proposals.
Two categories would almost certainly be excluded. Gains within Individual Savings Accounts are already tax-free under current law, and you don’t even need to report them on a tax return.4GOV.UK. Individual Savings Accounts (ISAs): How ISAs Work Investments inside registered pension schemes such as SIPPs also grow free of capital gains tax. Stripping those protections would hit millions of ordinary savers and is politically unthinkable in any near-term proposal. Primary residences are likely exempt for similar reasons; taxing the family home on unrealised appreciation would push homeowners without liquid savings into impossible positions.
Cryptocurrency
HMRC already treats profits from buying and selling crypto tokens as subject to capital gains tax on disposal. What changes in 2026 is reporting infrastructure. From 1 January 2026, the Cryptoasset Reporting Framework requires UK crypto service providers to collect and report user transaction data and tax residency information to HMRC, which will share it with other countries’ tax authorities.5GOV.UK. Implementation of the Cryptoasset Reporting Framework (CARF) This is not an unrealised gains tax on crypto, but it sharply increases HMRC’s ability to identify investors who have not been reporting disposals. If an unrealised gains framework ever arrived, crypto above the relevant threshold would almost certainly be included, and HMRC would already have the data pipeline to track it.
The Valuation Problem
Valuing publicly traded shares is trivial: take the closing price on the relevant date. Everything else is a headache, and valuation difficulty is arguably the biggest practical obstacle to any unrealised gains tax.
Private company shares have no market price. Their value depends on projections, comparable transactions, and professional judgement. As evidence submitted to the House of Lords noted, valuing an illiquid business where shares aren’t publicly traded is “very subjective and therefore open to lengthy and time-consuming disputes.”6Parliament. House of Lords – Inheritance Tax Measures: Unused Pension Funds and Agricultural and Business Property Reliefs – Section: Valuation Issues for Specific Assets HMRC’s Shares and Assets Valuation team already publishes guidance on valuing unquoted shares for inheritance tax and CGT purposes.7GOV.UK. Shares and Assets Valuation Manual An annual unrealised gains tax would multiply that workload enormously, because every covered taxpayer would need a fresh valuation each year rather than one at the point of sale or death.
Property valuations for tax purposes follow the RICS Valuation – Global Standards, commonly called the Red Book, which sets mandatory practices for chartered surveyors.8RICS. RICS Valuation – Global Standards (Red Book) Professional valuations of commercial property or private businesses can run into thousands of pounds per asset per year. For someone with a diversified portfolio of illiquid holdings, the annual compliance cost alone could be substantial, and HMRC would face its own resource challenge in reviewing the results.
Liquidity and Deferral
The current escape valve for people who can’t pay a tax bill on time is a Time to Pay arrangement with HMRC. But HMRC expects you to use savings and sellable assets to reduce the debt first, so a liquid investment portfolio won’t be left alone while you pay in instalments.9GOV.UK. If You Cannot Pay Your Tax Bill on Time: Setting Up a Payment Plan Any unrealised gains tax aimed at illiquid wealth would need a more formal deferral mechanism than this. The Oxford property tax proposal suggested pensioners could defer payment at a slightly higher rate, 0.6% instead of 0.5%, with HMRC accumulating an equity stake in the property until it was eventually sold.3University of Oxford. Expert Comment: A Property Wealth Tax Is Now Politically Feasible
Emigration and the Absence of an Exit Tax
One obvious response to a tax on unrealised gains is to leave the country. The UK currently has no exit tax; there is no deemed disposal of your assets simply because you cease to be UK tax resident. The Autumn Budget 2025 considered but ultimately did not introduce one, reportedly to avoid further destabilising the tax environment after the non-domicile regime reforms.
What the UK does have is a temporary non-residence rule. If you leave the UK and return within roughly five years, any gains that arose during your absence are treated as arising in the year you come back and taxed accordingly.10HM Revenue & Customs. Temporary Non-Residents and Capital Gains Tax That prevents the most straightforward avoidance tactic, popping abroad for a year, selling everything, and returning. It does not catch someone who leaves permanently.
Research estimates that unrealised gains escaping UK taxation through permanent emigration cost the Exchequer hundreds of millions of pounds per year, concentrated among a handful of ultra-wealthy individuals. If an unrealised gains tax were introduced without an accompanying exit charge, it would create a powerful incentive for the people it targets to relocate. Any serious implementation would likely need to address that gap, though the political and legal complexity of taxing people on the way out is considerable.
Where Things Stand
The gap between policy debate and enacted legislation is wide. No draft bill exists, no formal consultation has been launched, and the government has not committed to taxing unrealised gains. What has happened is a steady ratcheting of the existing regime: higher rates, a smaller annual exemption, tighter reporting for crypto assets. Each of these raises more revenue from investment wealth without the conceptual leap to taxing gains that haven’t been realised.
Whether that leap eventually comes depends on fiscal pressure, political will, and whether valuation costs, liquidity constraints, and emigration risk can be solved in a way that raises meaningful revenue without creating chaos for HMRC and taxpayers. For now, the rules that actually exist are the ones to plan around: 24% on gains above £3,000 for higher-rate taxpayers, with every reason to expect that rate and threshold to tighten further before they loosen.