The leadership turmoil surrounding Prime Minister Keir Starmer has reignited a fierce debate in Britain over how the government should raise revenue, giving renewed momentum to Labour politicians advocating higher taxes on wealth.
As pressure mounts on Starmer’s leadership, several prominent figures within the Labour Party have intensified calls for reforms targeting capital gains, property and financial institutions, arguing that Britain’s tax system places too much burden on workers while allowing wealth to remain comparatively undertaxed.
Andy Burnham, currently viewed by betting markets as a leading contender to replace Starmer, has emerged as one of the strongest voices pushing for wealth-focused tax reforms. During his official campaign launch last week, Burnham argued that Britain has “overtaxed labor and undertaxed wealth” and proposed increasing taxes linked to land and property ownership.
Another potential leadership contender, Health Secretary Wes Streeting, has also entered the debate, although he is widely seen as more centrist within the party. Streeting recently called for a “wealth tax that works” and proposed aligning capital gains tax rates with income tax rates.
Under Streeting’s proposal, capital gains taxes would rise substantially. The lower rate would increase from 18% to 20%, while the higher rate would jump from 24% to 40%, with a new top rate of 45%.
Supporters argue the reform would simplify the tax system, close loopholes and generate billions of pounds in additional revenue. Streeting cited research from the Centre for the Analysis of Taxation estimating the changes could raise as much as £12 billion annually.
However, estimates over the actual revenue potential vary sharply.
The Liberal Democrats previously proposed a similar policy during the 2024 general election campaign and estimated it would generate approximately £5.2 billion per year after accounting for inflation adjustments.
HM Revenue & Customs, meanwhile, has warned that raising capital gains taxes too aggressively could actually reduce government revenue over time. Officials argue that investors often delay selling assets when taxes rise, meaning taxable gains are postponed or avoided entirely.
This volatility has already become visible in recent years. Chancellor Rachel Reeves increased capital gains tax rates in her October 2024 budget, prompting investors to rush sales before the changes took effect.
As a result, capital gains tax receipts surged to a record £24.3 billion in the 2025-26 fiscal year, compared with £13.7 billion the previous year.
The Office for Budget Responsibility said much of that increase was driven by investors “crystallizing” gains before higher tax rates came into force. Tax payments from those transactions were largely collected in January, when receipts reached £18.9 billion — around £8 billion higher than any previous January on record.
Tax specialists have warned that such spikes are unlikely to continue.
Rachel Griffin from wealth management firm Quilter said many investors simply accelerated disposals ahead of the tax increase and that revenues could now decline as higher rates begin affecting investor behavior.
The debate over wealth taxes comes as Britain’s public finances remain under severe strain.
National debt is approaching 100% of GDP, leaving policymakers under pressure to identify new revenue sources while avoiding additional borrowing that could unsettle financial markets.
Labour politicians remain cautious about increasing government debt following the financial turmoil triggered by former Conservative Prime Minister Liz Truss’s short-lived administration in 2022, when unfunded tax cuts rattled bond markets and forced emergency intervention by the Bank of England.
The economic pressure has intensified further because of rising global energy and commodity costs linked to conflict in the Middle East, including the ongoing Iran crisis.
Treasury analysis reportedly suggests that a household support package similar to the £50 billion measures introduced during the 2022 energy crisis could significantly raise mortgage costs while adding billions more to government debt servicing expenses.
Despite growing calls for new taxes, Reeves has publicly signaled reluctance to introduce further broad increases.
“My two budgets have both increased taxes substantially, and I would prefer not to have to do that again,” Reeves told reporters during a visit to Washington last month.
Britain’s tax burden is already at its highest level since World War II, while some analysts argue the country already relies heavily on wealth-related taxation compared with other advanced economies.
According to the Institute of Economic Affairs, Britain collects a larger share of GDP from wealth taxes than any other OECD member nation.
Even so, politicians on Labour’s left wing believe additional reforms are necessary.
Burnham has proposed revising Britain’s council tax system, which is still based on property valuations dating back to 1993. A revaluation would shift more of the burden toward expensive homes, particularly in London, while lowering taxes for households in lower-value regions.
Although technically not a direct wealth tax, supporters say the reform would function similarly by targeting property wealth more aggressively.
Burnham has also floated the possibility of increasing inheritance tax and restoring the top income tax rate to 50% from the current 45%.
Meanwhile, Reeves announced last November that the government plans to introduce a surcharge on properties worth more than £2 million starting in 2028. The government has also reduced inheritance tax relief on AIM-listed shares to 20%.
Other Labour figures have targeted the banking sector.
Angela Rayner and former Transport Secretary Louise Haigh have both argued that banks have benefited disproportionately from high interest rates and should contribute more through taxation.
Rayner previously proposed increasing corporation tax on banks, a measure estimated to raise around £700 million annually according to leaked government documents.
Haigh has advocated for a windfall tax targeting profits linked to the Bank of England’s quantitative easing policies. The Institute for Public Policy Research estimated such a measure could generate approximately £32 billion over five years.
Advocates of wealth taxes argue the measures would primarily affect Britain’s richest households.
Research from the Centre for the Analysis of Taxation suggests that only around 3% of taxpayers currently pay capital gains tax, while roughly 68% of additional revenue from higher rates would come from the top 0.1% of earners.
The Resolution Foundation has also called for closer alignment between capital gains and income tax rates, arguing that the current system unfairly advantages investment income over wages.
Critics, however, warn that aggressive taxation could drive wealthy individuals, investors and businesses out of Britain.
The UK has already seen some high-net-worth individuals relocate to lower-tax jurisdictions such as Italy and Gulf countries following recent changes to taxes affecting non-domiciled residents, private equity executives and property owners.
Conservative politicians have strongly opposed the proposals.
Shadow Chancellor Mel Stride warned that raising taxes on investment and entrepreneurship would hurt economic growth.
“Slapping a tax of up to 45% on investment and entrepreneurship won’t grow the economy — it’s a desperate raid on ambition that will drive wealth, businesses and jobs out of Britain,” Stride said.
Concerns have also emerged that some of the proposed loophole closures would affect not only the ultra-wealthy but also landlords, sole traders and self-employed workers who structure earnings through dividends and capital gains.
Still, with political pressure building inside Labour and Britain’s fiscal challenges showing little sign of easing, the debate over wealth taxation is likely to remain at the center of the country’s political and economic agenda in the months ahead.
