Capital gains tax is a levy charged on the profit someone makes when selling an asset

Former Chancellor Jeremy Hunt has cautioned that pushing capital gains tax (CGT) beyond 24 per cent would prove "terrible for the economy" and ultimately deliver less money to Government coffers rather than more.

The former Chancellor, speaking on IG's The Art of Investing podcast, argued that raising the levy above its current threshold would backfire as investors modify their financial decisions in response.

Mr Hunt maintained that the negative economic impact of such a move would far exceed any immediate political benefits, urging policymakers across the political spectrum to resist calls for higher rates.

His intervention comes as analysis from IG suggests that bringing CGT in line with income tax rates could cost the Treasury approximately £8billion annually.

Mr Hunt was unequivocal in his message to Governments of all political persuasions, stated: "It would be terrible. And it doesn't matter if you're left or right, don't do it.

"If you increase your capital gains tax above 24 per cent, you will get less revenue, not more, because investors will change their behaviour."

He elaborated on the likely consequences, warning that investors would simply hold onto their assets, relocate them overseas, or leave the country entirely.

The ex-Chancellor added: "So if you're a left-wing government that wants to raise more money to redistribute it to poorer areas or to put it into public services, don't do this because you'll get less money for the things that you care about."

For centre-right Governments focused on enterprise and wealth creation, he argued the case against was equally compelling, as higher rates would stifle the dynamism needed for economic success.

The Conservative MP also turned his attention to what he described as a "crazy situation" created by the £100,000 tax cliff edge.

Workers earning between £100,000 and £125,140 face a punishing effective marginal tax rate of 62 per cent as their personal allowance is gradually withdrawn, while parents crossing the threshold forfeit access to free childcare worth thousands of pounds annually.

Mr Hunt shared: "We've got this crazy situation where some people tell their bosses, 'I don't want to earn £100,000 - leave my salary on £99,000,' because they're better off being able to claim their free childcare and not deal with this tax cliff edge."

He contended that such distortions in the tax system undermine productivity and must be addressed to foster a more competitive economy.

Research conducted by IG, drawing on HM Revenue and Customs' (HMRC) own assumptions, indicates that aligning capital gains tax with income tax rates would leave the Treasury nearly £8 billion worse off each year.

Michael Healy, CEO of IG Consumer, said: "We would strongly urge the incoming Prime Minister and the next Chancellor to avoid hiking Capital Gains Tax."

He warned that increasing the tax burden on investment gains risked deterring participation at precisely the moment when Britain needs more people backing domestic businesses and building financial resilience.