GOVERNMENT was urged to raise capital gains tax to equal income tax as a new study today reveals the policy would only harm “passive asset owners” rather than investors.

The Institute for Public Policy Research (IPPR) said this would raise around £14 billion a year.

Prime Minister Sir Keir Starmer has said speculation the tax would be raised as high as 39 per cent in this month’s budget was “wide of the mark.”

Chancellor Rachel Reeves will announce measures to fill in a so-called £22 billion black hole in the government’s finances on October 30.

BrewDog founder James Watt has said raising capital gains tax “will destroy entrepreneurial spirit in the UK and in turn severely damage our economy.”

IPPR study author Pranesh Narayanan said: “The recent fearmongering from some that increasing [the tax] will take the economy back to the stone ages is pure hyperbole.  

“We have spoken to multiple millionaires in the last few weeks who have made it clear that equalising capital gains tax with income tax would make absolutely no difference to their investment or entrepreneurial pursuits.” 

For higher earners, the tax is currently 24 per cent on gains from selling additional property, or 20 per cent on profits from other assets like shares.

IPPR said evidence shows that entrepreneurs and investors alike focus more on issues such as access to financing, market opportunities and broader economic conditions rather than capital gains tax.

This chimes with former Google boss Eric Schmidt’s comments at the government’s inaugural investment summit on Monday. 

“The cost of capital and the delay [in planning regime and regulation] is killing you, and furthermore you’re not going to achieve your 2030 energy goal, which is laudable, without fixing this,” he claimed.