(Bloomberg) -- Rachel Reeves has signaled that the carried interest earned by private equity managers putting their own capital at risk will be exempt from the Labour Party’s plans to raise taxes on private equity fund managers.

If it wins the general election on July 4, Labour has pledged to change the taxation treatment of carried interest — a slice of profits from an investment shared by select employees in a private equity fund — to make it like income, not capital gains that are taxed at a lower rate.

“If you are putting your own capital at risk it is appropriate that you pay capital gains tax,” Shadow Chancellor Reeves said in an interview with the Financial Times, while noting this only represented a “tiny” part of the total amounts invested by the industry and she expected most carry to be taxed as income. 

Her comments, which confirm an earlier Bloomberg report, add more detail to Labour’s mooted changes, which have sparked consternation in the industry. Its election manifesto says the shift would raise £565 million ($722 million) annually, to be spent on adding mental-health staff in the National Health Service, legal aid for disaster victims and the waiving of visa costs for non-UK veterans who served in the British military.

Reeves also reiterated that Labour would consult on the changes if elected.

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