28th August 2026

UK markets were flat this week, with the FTSE 100 Index rising by 0.6% to 10,810 points at the time of writing.

HM Revenue & Customs reported record capital gains tax (CGT) receipts of £24.2 billion for the 2024/25 tax year, an 89% increase on the previous year and a record level of receipts received. The number of people paying CGT increased by 45% to 584,000, while total reported gains rose by 82% to £127 billion.

The increase reflects a combination of higher CGT rates, reductions in the annual tax-free allowance and changes to Business Asset Disposal Relief. The previous chancellor, Rachel Reeves increased CGT rates in her 2024 Budget to between 18% and 24%, compared with previous rates of between 10% and 20%. The figures will be closely watched as the government considers further measures to strengthen the public finances. However, they also highlight the potential limitations of relying on higher capital taxation to generate sustainable revenues. Further increases could prove counterproductive if investors and business owners respond by delaying asset sales or restructuring their affairs to reduce their tax liabilities.

Attention is now turning towards Chancellor John Healey’s first Budget in October, with the fiscal outlook facing additional pressure from weaker immigration projections and their potential impact on economic growth. The Institute for Fiscal Studies has suggested that lower net migration forecasts could reduce the Chancellor’s fiscal headroom by up to £4 billion when the Office for Budget Responsibility publishes its latest projections. The public finances are also facing pressure from the inflationary consequences of the war in Iran, which has contributed to higher government borrowing costs.

While stronger inflation and wage growth could provide some offset through increased tax receipts, they may also complicate the outlook for interest rates and gilt yields. For investors, the key question remains whether the government can restore confidence in the sustainability of the public finances without introducing measures that undermine economic growth or investment.

The October Budget will therefore be an important event for UK assets, with markets focusing closely on the balance between tax increases, spending restraint and borrowing. Domestically focused equities could be particularly sensitive to further fiscal tightening, while continued volatility in gilt markets may influence sterling, interest-rate expectations and equity valuations. The government’s ability to maintain fiscal credibility while supporting growth is likely to remain a key driver of UK market sentiment.

Commodity markets

In the commodity markets, Brent crude futures traded around $89 per barrel on Friday and are set for a weekly fall, despite reports that US President Donald Trump is not interested in returning to previous deal terms with Iran.

A Wall Street Journal report said the Trump administration has repeatedly told mediators they have no interest in restoring the June memorandum of understanding, causing complications around restarting diplomatic talks. Earlier on Thursday, Washington explicitly defined it was not in talks with Iran despite efforts by other countries to re-engage the two sides. On Monday, the US announced what it called the “toughest sanctions in history” on Iran, with Tehran describing the sanctions as “inhumane and hostile”.

Elsewhere, geopolitical tensions escalated after Moscow warned it could strike British military targets inside and outside Ukraine in response to Kyiv’s attacks on Russian territory using British-supplied long-range cruise missiles.

President Trump said Russian President Vladimir Putin would not attack a NATO country, and he downplayed media reports that CIA Director John Ratcliffe had warned Russian officials against such an attack this week. Gold prices remain flat around $4,600 an ounce on Friday, as investors await remarks from Federal Reserve Chair, Kevin Warsh at the Jackson Hole symposium for clues on the outlook for interest rates.

Equity markets

US equity markets were mixed on Friday following strong gains in the previous session, driven largely by positive results from the technology sector.

In Thursday’s regular session, the Dow Jones Industrial Average rose 0.20%, the S&P 500 gained 0.72%, while the Nasdaq Composite advanced 1.57%. Strong corporate profitability has continued to support US equity markets, although it has also highlighted a widening disparity between corporate earnings and household incomes.

Pre-tax corporate profits reached an annualised $4.8 trillion in the second quarter, equivalent to 18% of national income and the highest share since the aftermath of the Second World War. By contrast, employees’ share of national income from wages and benefits fell to 60%, its lowest level since the 1950s. The divergence is becoming an increasingly important political issue.

While the strength of corporate earnings and rising equity markets has supported retirement accounts and investment portfolios, the benefits have been distributed unevenly. Higher-income households, which derive a greater proportion of their income from investments, have benefited disproportionately, while middle- and lower-income households remain more dependent on wage growth and continue to face pressure from the cost of living. This year’s earnings growth has helped drive US equities to record levels, with the artificial intelligence boom contributing to particularly strong profitability among large technology companies. Higher energy prices have also supported the earnings and margins of major oil producers.

Meanwhile, inflation data provided a mixed picture. The personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation, rose by 0.2% in July, taking the annual rate to 3.7%, slightly above market expectations. Core PCE, which excludes volatile food and energy prices and is generally viewed as a better indicator of underlying inflation trends, increased by 0.2% during the month and 3.3% on an annual basis, broadly in line with forecasts.

The report also showed continued resilience in the US consumer, with personal income rising by 0.4% and spending increasing by 0.2%, both ahead of expectations. Goods prices fell by 0.1% during the month, helped by lower energy and household goods prices.

For investors, the data reinforces the Federal Reserve’s difficult balancing act. Corporate earnings and consumer activity remain supportive of the economy and equity markets, but inflation continues to sit well above the Fed’s 2% target. The timing and pace of future interest-rate decisions will therefore remain a key driver of US equity and bond markets.