Impact of equity prices on receipts

Receipts are forecast to be £12 billion higher than expected in the November 2025 forecast by 2030-31. Around three-quarters (£9 billion) of this increase is driven by higher-than-expected equity prices. Equity prices (proxied by the FTSE All-Share index) in the first quarter of 2026 are expected to be around 8 per cent higher than we assumed in the November forecast.^a Equity prices are then assumed to rise from the latest outturn in line with nominal GDP, and so remain around 8 per cent higher throughout the forecast. Higher equity prices boost receipts from several tax heads:^b

• Capital gains tax (CGT), where equity prices are used to forecast the value of financial asset disposals. CGT is charged on the gain rather than the value of equity, so the impact of higher equity prices is amplified by a ‘gearing’ effect where 1 per cent growth in equity prices results in 2.7 per cent growth in CGT liabilities on financial assets.^c In this forecast, higher equity prices drive an increase of around £3.7 billion a year on average in CGT receipts over the forecast period, reaching £5 billion in 2030-31. There is also an increase in self-assessed income tax (SA IT) receipts due to higher equity prices of £0.5 billion a year on average from 2027-28.^d
• Onshore corporation tax, where higher equity prices drive increases in receipts from the life assurance sector, which holds significant equity on its balance sheet with gains taxed as profits. As with CGT, the impact of higher equity prices is amplified by a gearing effect. The overall equity price impact on onshore CT accounts for around £1.1 billion of the increase in receipts on average over the forecast.
• Inheritance tax (IHT), where equity prices are used to project the value of shares held by estates. Higher equity prices increase IHT receipts by around £0.3 billion a year on average over the forecast.
• Stamp duty on shares, where the increase in equity prices increase receipts by an average of £0.4 billion a year on average over the forecast.
• Interest and dividend receipts, where equity prices increase returns from funded pension assets. The increase in equity prices drives an increase in forecast receipts of around £0.6 billion a year on average.

The forecast assumes a steady increase in equity prices, but in practice equity prices are highly volatile from year to year, which has led to large differences between forecasts and outturns for these tax heads. The increase in receipts at this forecast could therefore easily be reversed by a fall in equity prices. Paragraph 3.6 uses sensitivity analysis to illustrate this risk. This estimates that if equity prices were 10.3 per cent lower compared to the central forecast, receipts could be £10 billion lower in 2030-31. Chapter 6 summarises the potential wider impacts of an equity price shock on the economy and public finances that were set out in the scenarios produced for the November 2025 Economic and fiscal outlook (EFO).