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.
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.
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.
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.
Your figures
The Lib Dem bands
Today's CGT uses 2026/27 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.
Frequently asked questions
How would the Lib Dem capital gains tax reform affect me?
Enter your gain and income above to compare today's CGT with the Lib Dems' standalone 20/40/45% bands and £5,000 allowance.
What is the Lib Dem capital gains tax plan?
Standalone CGT rates of 20% (to £50,000 of gains), 40% (£50,000–£100,000) and 45% (above £100,000), based only on the gain, with a £5,000 allowance.
How is it different from today?
Today CGT is 18% or 24% and stacks on top of your income; the Lib Dem version is based only on the size of the gain, independent of income.
Is it law?
No — it's a Liberal Democrat proposal.
Sources & further reading
- Liberal Democrats — manifesto and CGT proposals.
- Tax Journal — analysis of the Lib Dem CGT plan.
- GOV.UK — current CGT rates and allowances.
- Institute for Fiscal Studies — Capital gains tax reform — options and trade-offs.
- House of Commons Library — Capital gains tax: recent developments.
Figures are illustrative and simplified; the inflation allowance is not modelled and revenue estimates are contested. General information, not financial, legal or tax advice.