CGT raid fears – what could it mean for investors?

Tax speculation is ramping up ahead of the 28 October Budget.

Prime Minister Andy Burnham and Chancellor John Healey are reportedly considering increasing Capital Gains Tax (CGT) to as much as 45%, to fund an increase in the personal allowance. It’s estimated this could raise, or in other words cost investors, an additional c.£20 billion by 2030.

Investors have already seen the CGT regime become markedly less favourable, with the annual exemption cut by more than 75% and rates on most investments increased to as much as 24% two years ago.

If the 2026 Budget brings further rate increases, the impact is likely to be significant.

Some may simply decide not to sell assets and hang onto them instead.

There are, however, alternatives. The government-backed Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS), for instance, could help save tax while directing capital towards growing British businesses.

Investors grappling with the last CGT rate increase are increasingly turning to these schemes. SEIS offers up to 50% CGT reinvestment relief, while EIS allows investors to defer capital gains. Tax rules can change and benefits depend on circumstances.

Indeed, we have already seen a significant uptick in SEIS demand, particularly since the start of the year. That's when a large number of people filling their tax returns would have seen, in pounds and pence, the impact of the higher CGT rate introduced in the 2024 Budget. Since 1 February 2026, 45% more has been invested in SEIS through Wealth Club compared with the same period last year. Remember: investing in early-stage businesses is high risk and you should not invest for the tax benefits alone.

So, if you are affected by the existing higher rate of CGT and record-low tax-free allowance, and are concerned about potential further changes, what options do you have?

Here we explain what options are available to experienced investors, how SEIS and EIS work, their benefits and risks.

This article provides a brief outline based on current rules, which may include annual investment limits, minimum holding periods and other conditions: you should consider these carefully before investing. 

When you invest in SEIS, you are effectively backing a basket of usually 10-25 very young and ambitious companies. Any one of them could become a household name, but statistically the risk of failure is very high. 

To compensate for the significant risks – and to encourage investment – the government offers very generous tax relief:

• Up to 50% income tax relief – up to £5,000 saving on a £10,000 investment this or previous tax year
• Generous allowance – £200,000 per tax year
• Tax-free growth
• Up to 50% CGT relief – this is called capital gains reinvestment relief and could halve the CGT due on gains from elsewhere
• Loss relief – offset any SEIS investment loss against your income tax bill
• Inheritance tax relief – potentially pass on your investment free from IHT

What should you bear in mind?

Alongside the considerable risks of investing in small, young companies, please remember that to claim Reinvestment Relief you must have also claimed the income tax relief in the same tax year. So, in the above example, to claim full relief on the £24,000 CGT bill, you would first have to claim the £50,000 income tax relief in the same tax year. The maximum you can invest in SEIS with tax relief is currently £200,000.

If you don't invest the full gain, you should get CGT relief of 50% of the portion of the gain you have invested into SEIS.

You can think of the EIS as the older sibling of SEIS. It targets the same type of companies – young and ambitious – but a little further down the line, perhaps once they have started to commercialise or generate revenue. At this stage, the risk of failure is slightly lower than with SEIS but still significant.

This is reflected in the level of tax relief on offer: 

• Up to 30% income tax relief – up to £3,000 saving on a £10,000 investment this or previous tax year
• Very generous allowance – up to £1 million per tax year (or £2 million if at least £1 million is in knowledge-intensive companies)
• Tax-free growth
• Capital gains deferral – defer capital gains from other investments, potentially indefinitely
• Loss relief – offset any EIS investment loss against your income tax or CGT bill
• Inheritance tax relief – potentially pass on your investment free from IHT  

What should you bear in mind?

Alongside the considerable risks of investing in small, young companies, there are two key points to remember when deferring a gain. 

First, you are deferring the gain, not eliminating it. When the EIS investment is realised, the CGT bill becomes payable, even if the investment is sold at a loss or has failed. One mitigating factor is that EIS loss relief may allow you to offset losses against either your CGT or income tax bill. 

Second, as mentioned earlier, when the CGT becomes payable, it will be charged at the prevailing rate at that time, so if CGT goes up the deferred gain will be subject to this higher rate. Remember, tax rules can and do change and the value of benefits will depend on individual circumstances.

If you don't invest the full gain, you should be able to defer the CGT due on the portion of the gain you have invested.

If you are concerned about CGT, but haven't yet realised a taxable gain, you may want to consider making the most of your annual ISA and pensions allowances.

In both cases, any gains you realise within the tax wrapper should be tax-free.

You can invest up to £20,000 in an Individual Savings Account (ISA) each tax year. The annual allowance for pensions (including SIPPs or Self Invested Personal Pensions) is more complex. Most UK residents under 75 can contribute as much as they earn, capped at £60,000. Restrictions can apply for higher earners, non-earners, and those already drawing pension income. In some cases, you may be able to invest more if you have unused pension allowance from the previous three tax years (for a quick summary, you can see our free Carry Forward factsheet).

If you are reviewing where to invest your ISA or pension, Wealth Club offers the Wealth Club Portfolio Service. Or, if you are interested in adding exposure to private markets to your investment portfolio, you could consider our Private Markets SIPP. 

Note: These are long-term investments that can fall as well as rise in value; returns are not guaranteed. Pensions are long-term investments: you cannot normally access your funds before age 55 (57 from 2028). Please check your eligibility before making any contributions. Private markets investments are high risk and illiquid – they are only for eligible investors. 

Picture of Prime Minister Andy Burnham by Simon Dawson / No 10 Downing Street