Capital gains tax is a levy on the profit someone makes from selling an asset
Thousands of Britons face a "double tax blow" on family assets under rumoured proposals being considered by the likely next Prime Minister Andy Burnham.
Analysts warn that households should prepare for a levy on inherited assets should Mr Burnham's Labour Government pursue anticipated capital gains tax (CGT) reforms.
The calculations reveal that beneficiaries selling a family home that has appreciated by £500,000 could be landed with a tax bill approaching £120,000 if the Government scraps the current CGT uplift on death.
Simultaneously, proposals to bring CGT rates in line with income tax could heap an additional £10,000 onto bills for those paying the top rate of tax.
The analysis focuses on two policy changes that have dominated recent fiscal discussions, with current CGT rates standing at 18 per cent for basic-rate taxpayers and 24 per cent for higher earners, alongside a £3,000 annual exemption.
The first proposed reform would eliminate the existing rule that resets an asset's value for CGT purposes when someone dies, effectively wiping out any gains accumulated during their lifetime.
Should this relief be removed, those inheriting assets would retain the original purchase price as their base cost, potentially triggering substantial tax demands when they eventually dispose of the property.
Ed Wood, a financial planning director at Rathbones, said: "For many families, the removal of CGT uplift on death would feel like a one-two punch.
The second reform under scrutiny would see CGT rates matched to income tax bands, pushing the top rate to 45% for additional-rate taxpayers.
Under this scenario, someone in the highest tax bracket realising a £50,000 gain outside ISAs and pensions would face a £21,150 bill, compared with £11,280 under existing rules.
Higher-rate taxpayers would see their liability on the same gain jump from £11,280 to £18,800, while even basic-rate taxpayers would experience modest increases.
Kirsty Cartwright, an investment director at Rathbones, shared: "For higher and additional-rate taxpayers, aligning CGT rates with income tax rates could add thousands of pounds to the tax bill on a single disposal.
"For business owners, landlords and long-term investors, any reforms could have implications not only for investment returns, but also for succession planning and the transfer of wealth between generations."
Rathbones cautioned that ramping up CGT could deter investment precisely when Britain requires private capital to drive economic growth.
Mr Wood added: "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."
The firm noted that these potential CGT changes would arrive alongside planned inheritance tax reforms bringing unused pension pots within the IHT net from April 2027, intensifying concerns about how much family wealth will ultimately pass to HMRC.
