Reeves tax hikes are backfiring so badly

CHANCELLOR Rachel Reeves is discovering that hiking taxes left, right and centre doesn’t necessarily mean that she will raise more revenue.

- By Harvey Jones

Possibly the reverse, in fact. Capital gains tax is the prime example. Since Reeves hiked CGT in last October's Budget, the government's tax haul has actually fallen.

In the first half of 2025, CGT receipts dropped to £11.8billion, down from £13.5billion a year earlier. That’s a £1.7billion fall. Tax expert Shaun Moore at Quilter described it as a “policy backfire”.

He’s right. Taxpayers adapt to punitive rates. Instead of crystallising gains, they delay in the hope a future government will reverse the hike.

And the same is now happening with inheritance tax, following Reeves's frankly terrible plan to slap IHT on unused defined contribution pension pots from 2027.

HMRC figures show people are already taking evasive action by scrambling to drain their pensions, two years before the tax comes in.