Andy Burnham, the newly elected Labour MP for Makerfield, is reportedly considering a £21,150 charge on households with assets worth £50,000 as part of proposed capital gains tax (CGT) reforms. The changes, which include abolishing CGT uplift on death and aligning CGT rates with income tax rates, have sparked warnings from financial experts at Rathbones.
Proposed CGT Changes and Their Impact
Rathbones has highlighted growing speculation that CGT rates could be aligned with income tax rates, potentially increasing the rate paid on gains to as much as 45% for additional-rate taxpayers. Under this scenario, an additional-rate taxpayer making a £50,000 gain outside tax wrappers such as ISAs and pensions could face a tax bill of £21,150, compared with £11,280 under the current regime — an increase of £9,870. Higher-rate taxpayers would also see a notable increase in their tax burden.
Examples of Tax Increases
For a £10,000 gain, the tax bill would rise to £2,800 from £1,680 currently. On gains of £50,000, the tax liability would increase to £18,800, up from £11,280 today. Basic-rate taxpayers would also be affected, with the tax bill on a £10,000 gain rising from £1,260 to £1,400 if CGT rates were aligned with income tax rates.
Expert Warnings on Investment and Complexity
Ed Wood, Financial Planning Director at Rathbones, said: "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 added: "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."
Concerns Over Inheritance and Paperwork
Wood expressed particular concern about the removal of CGT uplift on death: "For many families, the removal of CGT uplift on death would feel like a one-two punch. Not only could inherited wealth be subject to inheritance tax, but beneficiaries could also face a CGT bill on gains that accrued during their loved one's lifetime." He noted that the forthcoming inclusion of unused pension pots within inheritance tax calculations adds to the growing concern that a much larger slice of intergenerational wealth will end up in the taxman's coffers.
Wood warned of additional challenges: "Removing CGT uplift on death could also create a paperwork nightmare for executors, who may be forced to reconstruct decades of ownership history, track down purchase records, calculate the cost of long-forgotten improvements and establish the original acquisition cost of assets that may have been held for generations. For grieving families, the challenge may not just be paying the tax, but establishing how much tax is due in the first place. Any reform would therefore risk adding significant complexity, cost and delay to the administration of estates at an already difficult time."
