There’s speculation that capital gains taxes could be revamped to prevent wealthy individuals from hoarding wealth in the form of assets.
As it stands, capital gains taxes on inherited properties are reduced or eliminated via private residence relief.
In the Autumn Budget, which generally takes place around October or early November, Chancellor Rachel Reeves will set the economic agenda for the next few months.
Responding to the speculation, Sarah Coles, head of personal finance, Hargreaves Lansdown, said: “As a tax on wealth, this could be in the frame at a time when the government is keen not to focus on taxes on earned income.
“There have been suggestions of a potential shake-up to capital gains tax, including how it’s treated after someone dies.
“Recent governments have hiked the tax and cut the annual tax-free allowance, but while data for 2023 shows that it dragged 87,000 more people into paying CGT, the tax take itself actually fell by a third.
“There’s a strong chance wealthier investors are hoarding assets until they die, because capital gains reset on death.
“It raises the question of whether the government will tweak this rule, so it remains payable by the estate.
“It could be horrible news for those who invest outside a stocks and shares ISA, whose estate could end up paying both CGT and IHT on their investments.”
In the months leading up to last year’s Budget a number of people sold assets owing to fears the tax would be hiked, which never happened.
Coles added: “For landlords who decided to sell up, they reacted to a tax hike that never came, and the exodus of landlords from the rental market has caused huge headaches for tenants.”
In terms of inheritance tax, the government is thought to be exploring the possibility of a cap on gifts that people can make during their lifetime.
Currently no tax is paid on gifts providing the person gifting the money lives for seven years.
Coles said: ‘There’s a risk that, after the changes, people hold back on making these gifts, leaving their families struggling.
“There’s also the danger that people will rush to make gifts under the current regime, and give away more than they can afford, before they can afford to do so.
“This could leave them horribly short of cash, especially if they need care later in life. If you’re not sure what to do, it’s vital not to rush into anything you could come to regret.”
