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Wealth & tax · UK-wide

The Lib Dems' capital gains tax reform: what would change?

Three standalone CGT rates based only on the size of the gain, a higher tax-free allowance, and a new relief for gains that are purely inflation.

Status: Proposal — not law Region: UK-wide Party: Liberal Democrats From: 2024 manifesto

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What's being proposed

The Liberal Democrats would overhaul capital gains tax (CGT) — the tax on profits from selling assets like shares or a second property — to "close loopholes exploited by the super-wealthy". Their plan has three moving parts: replace today's 18% / 24% rates with three standalone rates — 20% on gains up to £50,000, 40% on gains between £50,000 and £100,000, and 45% above £100,000; set those rates purely on the size of the gain (rather than stacking the gain on top of your income, as now); raise the tax-free allowance from £3,000 to £5,000; and add a new inflation allowance so gains that merely keep pace with inflation aren't taxed. They say the package would raise around £5bn a year.

This is different from the Greens' CGT plan. The Greens align CGT with income tax and stack the gain on your income; the Lib Dems use their own fixed bands based only on the gain, plus a bigger allowance and an inflation relief. The calculator below models the Lib Dem bands and allowance (the inflation relief isn't modelled — see the note).

The case for and against

Supporters argue

  • It narrows the gap between tax on wealth and tax on work, reducing avoidance.
  • The inflation allowance means people aren't taxed on purely inflationary "gains".
  • A higher allowance protects small investors; the highest rates hit only the largest gains.

Critics argue

  • Higher CGT can discourage asset sales and investment ("lock-in"), raising less than hoped.
  • Basing rates only on the gain is a significant structural change to administer.
  • It can affect landlords, entrepreneurs and second-home owners, not just the very wealthy.
Interactive calculator

What would a gain cost?

Enter a capital gain (and your income, used only for today's figure) to compare CGT now with CGT under the Lib Dem bands.

A what-if, not a forecast. Nothing here is law. Today's figure uses 2025/26 CGT rules; the proposed figure uses the Lib Dem standalone bands and £5,000 allowance. The proposed inflation allowance is not modelled, so the real Lib Dem figure could be lower. Not financial advice.

Your figures

The Lib Dem bands

Tax-free allowance rises from £3,000 to £5,000.

Today's CGT uses 2025/26 rules: £3,000 annual exempt amount, then 18% on the slice of the gain within your remaining basic-rate band and 24% above. The proposal applies a £5,000 allowance and standalone bands — 20% on the first £50,000 of the (post-allowance) gain, 40% from £50,000 to £100,000, and 45% above — independent of your income. The Lib Dems' inflation allowance and small-business relief are not modelled, so the real figure under their plan could be lower. Not financial advice.

Sources & further reading

Figures are illustrative and simplified; the inflation allowance is not modelled and revenue estimates are contested. General information, not financial, legal or tax advice.