UK families could face a £120,000 Inheritance Tax increase if two rule changes are implemented, according to financial experts at Rathbones, one of the UK’s leading wealth and asset groups. The potential changes involve aligning Capital Gains Tax (CGT) rates with income tax rates and abolishing the CGT uplift on death, which Rathbones describes as a 'double blow'.
Capital Gains Tax Alignment
Rathbones warns that aligning CGT rates with income tax rates could add nearly £10,000 to the tax bill on a £50,000 property value increase for additional rate taxpayers. For higher-rate taxpayers, the increase would be more than £7,500. Currently, CGT rates stand at 18% for many basic-rate taxpayers and 24% for higher and additional-rate taxpayers, with a £3,000 annual exemption.
Abolition of CGT Uplift on Death
The abolition of CGT uplift on death could leave beneficiaries facing a tax bill of almost £120,000 when selling an inherited family home that has risen in value by £500,000. This change comes alongside planned Inheritance Tax changes that will bring unused pension funds within the scope of IHT from April 2027.
Expert Commentary
Ed Wood, Financial Planning Director at Rathbones, says: 'We've seen a significant increase in client enquiries about CGT as speculation grows over what fiscal measures a new government might consider to fund its economic agenda. With commitments made on the main tax levers, many investors see CGT as a potentially tempting area for policymakers looking to raise additional revenue.'
Wood adds: 'However, there is a risk that further increases in the CGT burden could discourage investment at a time when the UK needs private capital to turbocharge economic growth. There is also a question over whether higher rates would ultimately deliver the expected boost to the public finances, as investor behaviour often changes in response to tax increases.'
