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Julia Cox

Mary Perham

The first Autumn Budget on 28 October 2026, under Andy Burnham's premiership, is fast approaching, and there is increasing speculation as to potential changes to capital gains tax (CGT). 

Given his pledge not to increase income tax, VAT and National Insurance for working people during this parliament, CGT is one of the more likely targets for revenue-raising measures. 

While any changes discussed below remain speculative, the implications warrant consideration by anyone with significant CGT exposure. 

Most likely areas of reform

Raising CGT rates
Rachel Reeves previously increased the lower main rate of CGT from 10 per cent to 18 per cent and the higher main rate from 20 per cent to 24 per cent. Chancellor John Healey may seek to increase these rates, whether incrementally or by aligning CGT with income tax rates.

An incremental increase in CGT rates is the more modest option. However, the Centre for Policy Studies think tank suggested that a 10 per cent increase on the higher rate of CGT would reduce revenue by £3.6 billion ($4.81 billion) by 2028/29. 

If rates do substantially increase, there might be pressure to reintroduce some form of indexation allowance or tapering relief. Indexation allowance (available to individuals until April 1998 and companies until December 2017) ensured that taxpayers were only charged CGT on real gains above inflation. A 2024 report by the Institute for Fiscal Studies (IFS) argued that the current absence of any inflation adjustment is a fundamental design flaw of the CGT regime, and that increased rates would disproportionately penalise long-held assets. 

A more radical option is to align CGT rates with income tax rates. First proposed by Wes Streeting in his leadership pitch in May 2026, it would see three bands of CGT introduced, at 20 per cent, 40 per cent and 45 per cent, with a person’s CGT band calculated by combining their annual income and the gains generated on assets. However, the investment platform IG’s analysis using HMRC’s own methodology suggests that increasing CGT from 24 per cent to 40 per cent would lose HMRC £3.2 billion of revenue annually, and increasing it to 45 per cent a further £4.6 billion, a total estimated loss of £7.6 billion, driven primarily by a reduced volume of asset sales. Despite these economic risks, the government may still pursue alignment citing fairness and simplicity; but evidence suggests that careful calibration would be needed.

Removing or limiting the CGT uplift on death 
Currently, assets are “rebased” to their market value at their owner’s date of death, which wipes out any accrued gains or losses from the date of purchase. An estimated £1.5 billion has been forgone as a result. Two alternatives have been suggested: that death be treated as a disposal event for CGT purposes, triggering a charge at that point, or that such inherited assets could pass to beneficiaries without rebasing, thereby delaying the CGT charge arising until the asset’s subsequent disposal.  

The principal objection to either change is the possible resultant double taxation of CGT and IHT on the same asset on the death of the current owner. There is scope to couple CGT and IHT reform to avoid this; for example, denying the CGT uplift where the asset qualifies for an IHT relief. 

Additionally, given the reduction of Agricultural Property Relief (APR) and Business Property Relief (BPR) to 50 per cent on assets over £2.5 million in the 2025 Budget, further denying the CGT uplift on any “relieved” aspect is likely to lead to very complicated reporting calculations.

Changes to Business Asset Disposal Relief (BADR)
The BADR lifetime limit on qualifying gains was reduced from £10 million to £1 million in the March 2020 Budget. Phased changes from 2024 then increased the BADR rate from 10 per cent to 18 per cent from 6 April 2026, matching the current lower main rate of CGT. The government could seek to remove the lower rate, taxing qualifying gains at 24 per cent, or reduce the £1 million limit further. Prior to the 2024 Budget, the IFS estimated that abolishing BADR would raise about £1.5 billion. That is a considerable sum, but such measures seem likely to primarily hurt SME owners, impacting economic growth. 

The Treasury may otherwise limit or remove existing reliefs or exemptions such as the main residence exemption or holdover relief for gifts of business assets or gifts into trusts.  

Timing
Any change would usually take effect from the new tax year, 6 April 2027, but changes applying from the day of the Budget are not unprecedented. An immediate change in the tax regime would leave no opportunity for individuals to plan ahead, so those owning assets subject to significant capital gains may wish to consider how to minimise their CGT exposure now.

Pre-Budget planning strategies

Crystallising gains
Many people are accelerating disposals to lock in current rates on unrealised capital gains. This can mean fast-tracking an already-planned sale. Where there is no obvious purchaser, they could consider selling an asset into a trust at market value, with the consideration left outstanding as a debt. This triggers the gain at current rates but with other (tax) considerations.

Those who have not yet considered CGT concerns may wish to accelerate their disposal of the asset before the Budget, perhaps to a limited extent, e.g., to cover the £1 million BADR allowance, crystallising any gain whilst rates are certain. The downside is that they lose control of their asset, which will possibly not suit their personal or commercial plans.

It is worth noting that pre-Budget uncertainty benefits the Exchequer in the short-term by triggering disposals which swell government coffers, but risks stalling longer-term economic activity as investors hold off hoping for better rates.

Sale and buyback of quoted shares
Individuals owning quoted shares might consider selling and later repurchasing them either through their spouse or after waiting 30 days to avoid the “bed and breakfasting” rule (TCGA 1992, s 106A). However, HMRC may challenge pre-arranged spousal transfer arrangements under general anti-avoidance principles, and this strategy creates complications for family-run businesses. Stamp duty is also generally chargeable at 0.5 per cent of the purchase price on repurchase, a cost which should be factored in at the outset.

Gifting into trust
An individual could gift an asset to a settlor-excluded trust and not claim holdover relief, crystallising the gain at current CGT rates rather than deferring it to a future disposal by the trustees at potentially higher rates. The downsides are the loss of control over and benefit from the asset (although a carefully structured trust can mitigate some of these concerns), the resultant dry tax charge and an immediate IHT charge where the value of the asset exceeds the nil rate band.

Maximising tax-efficient wrappers and allowances 
ISAs and pensions both shelter investments from CGT entirely, although from 6 April 2027 all registered pension schemes (including SIPPs) will be included in individual’s estates on death for IHT purposes. Spousal transfers remain free of CGT until the receiving spouse disposes of the asset, and the remaining annual £3,000 CGT allowance should be maximised where possible. 

Do nothing
The final option is simply to wait. At this stage, potential tax changes remain speculative, and tax-planning decisions usually carry significant financial implications of their own.