On 20 July 2026, Andy Burnham became UK prime minister.
Alongside analysis of his cabinet reshuffle and the launch of No. 10 North, public commentary has focused on an estimated £4.7 billion funding gap.
This gap is linked to the Iran War, additional defence spending, and Labour Party manifesto promises that make it difficult for the incoming PM to increase the main rates of Income Tax, National Insurance, and VAT.
Despite these constraints, the fiscal pressure remains, and some tax areas could be reviewed under the new government.
Key takeaways
- Public debate might favour taxing assets and gains rather than headline taxes on earnings.
- As a high net worth individual, you should keep a close eye on CGT, pension tax relief, gifts, and the Mansion Tax.
- Speculation shouldn’t drive action, but plans can be reviewed, and scenario planning might suggest necessary amendments.
Keep reading to find out more about current tax policy uncertainty and the scenario planning you can undertake now.
Tax changes could be imminent – 4 key areas to watch
1. Capital Gains Tax reform
Aligning CGT rates with Income Tax
Under 2026/27 CGT rules, as a higher- or additional-rate taxpayer, you pay 24% on your gains when selling (or “disposing of”) chargeable assets.
Those who pay the basic rate of Income Tax pay CGT at a rate dependent on the size of the gain and their taxable income. Broadly speaking, if total taxable gains minus their tax-free allowance fall within the basic-rate tax band, CGT is charged at 18%. If the calculated figure is above the basic rate Income Tax band, CGT is chargeable at 24%.
One possible policy option discussed by commentators is to tighten the gap between CGT rates and Income Tax rates or even align them exactly.
Alignment of CGT and Income Tax has previously been considered in policy debate, including by the Office of Tax Simplification in 2020.
CGT on death
Under 2026/27 rules, CGT is not chargeable on death. Inherited assets are usually reset to their market value at the date of death, in what is known as the CGT uplift.
Abolishing this would mean the full value of the gain made throughout the period of ownership of the deceased would become liable for CGT.
An asset bought by the deceased for £100,000 that was worth £500,000 at the date of death and subsequently sold for £510,000 would see CGT chargeable not on the £10,000 rebased gain, but on the full £410,000.
Another option might be to charge CGT immediately on death.
Neither option has been put forward by the government, so changes remain speculation at the time of writing.
2. Pension tax relief changes
The Chartered Institute of Taxation quotes Burnham as saying that “we need a greater sense of fairness” and that the government “might be having to ask for a little more” to balance the books.
Alongside CGT reform, pension tax relief could also come under review.
Tax relief is currently applied automatically at the basic rate of 20%, with higher- and additional-rate taxpayers able to claim an extra 20% and 25% respectively through Self Assessment.
This means that a £100 pension contribution “costs” £80 for a basic-rate taxpayer, £60 for a higher-rate taxpayer, and just £55 for someone who pays the additional rate.
A flat rate of pension tax relief would reduce the cost of government top-ups.
Interestingly, higher- and additional-rate tax relief often goes unclaimed. According to City AM, this unclaimed tax relief could have totalled about £1.3 billion between 2016 and 2021.
3. Inheritance Tax-exempt gifts
Existing rules around gifting mean that you can gift as much as you like during your lifetime, and those gifts only become liable for Inheritance Tax if you die within seven years of making the gift.
IHT at 40% is usually payable on the gift if death occurs within three years (and your nil-rate band has been used up), with tax payable on a sliding scale, known as taper relief, on death between three and seven years. This is known as the seven-year rule, while the gifts are known as potentially exempt transfers.
Because there is no upper limit to this exemption, gifting early in life gives you a significant opportunity to pass on tax-efficient wealth. Likewise, the regular gifts from income exemption allows you to gift as much as you like with no IHT to pay, as long as certain criteria are met.
Changes to the treatment of large lifetime gifts could be considered by policymakers seeking additional revenue, although no confirmed policy has been announced.
4. The “Mansion Tax”
Commentary also suggests the government is considering a change to the High Value Council Tax Surcharge – also known as the Mansion Tax – due to take effect in April 2028.
It was originally announced as an annual charge of between £2,500 and £7,500, added to your Council Tax bill if your house is valued at between £2 million and £5 million.
Reports suggest that the government might consider reducing the lower band to include houses worth £1.5 million. According to The Negotiator, the move would result in more than 150,000 families being hit.
It’s important not to act based on rumour alone. However, if your property is worth between £1.5 million and £2 million, it might be sensible to model the potential annual cost as part of any future cashflow planning, to help you assess its potential impact.
Emotion-led decisions can be damaging, so stay calm and speak to the professionals
While tax changes are merely speculative at this stage, interviews – not to mention the fiscal reality – strongly suggest that tax rises are imminent.
If the government does opt to tax assets and leave headline rates on earnings untouched, you might need to revisit your plans, but that doesn’t mean it’s time to panic.
At HFMC Wealth, we have decades of experience working with volatile markets and changing legislation, and we can help you ask important questions, like:
- Which potential tax change would have the biggest effect on my family?
- Am I planning around current rules or building flexibility to account for future ones?
- Would my estate plans remain fit for purpose if gifts, pensions, or CGT were treated differently?
It might be that there are major transactions or gifts that you could consider making now in the light of potential future changes, but it’s important not to rush into speculative action. Instead, we can help you review your current flexibility, liquidity, estate plans, and the timing of major transactions to ensure they continue to work for you and your goals.
Get in touch
Tax policy is inherently uncertain, so you should always be wary of acting on speculation alone. The practical response is not panic, but preparedness: review your plan, understand your exposures, and retain enough flexibility to respond calmly if rules do change.
If you have any questions about potential future tax changes, contact HFMC Wealth today. Contact us online or call 020 7400 4700 to help plan your loved ones’ financial future.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
The Financial Conduct Authority does not regulate estate planning, cashflow planning, or tax planning.
Remember that taper relief only applies to gifts in excess of the nil-rate band. It follows that, if no tax is payable on the transfer because it does not exceed the nil-rate band (after cumulation), there can be no relief. Taper relief does not reduce the value transferred; it reduces the tax payable as a consequence of that transfer.
