Andy Burnham, the newly elected Labour MP for Makerfield and widely anticipated successor to Sir Keir Starmer as Prime Minister, is set to target middle-class families with a proposed tax overhaul that could leave them £23,280 worse off. The plan, reported by The Telegraph, would abolish the capital gains tax (CGT) uplift on death, meaning inherited assets would no longer be revalued at market value at the time of inheritance.
How the proposed change works
Currently, when someone inherits an asset, it is revalued at market value on the date of death, effectively wiping out any gains made during the deceased's lifetime. Capital gains tax is only charged on gains made after inheritance if the asset is later sold. Under Mr Burnham's proposed reforms, beneficiaries would instead inherit the original acquisition cost, making them liable for CGT on the full increase in value since the original purchase.
For example, if a property was originally bought for £100,000 and inherited when worth £200,000, the beneficiary would face a £100,000 gain if sold. After deducting the £3,000 annual CGT allowance, a gain of £97,000 would be taxed at 18% for basic-rate taxpayers or 24% for higher-rate taxpayers. A higher-rate taxpayer would consequently be £23,280 worse off compared to the current system.
Double taxation concerns
Critics argue this amounts to a "double death tax," as beneficiaries would face both inheritance tax and capital gains tax on the same property. Mike Warburton, Telegraph Money's tax columnist, said: "We already have a death tax in the form of inheritance tax and I do not think we need another one. Executors already have a difficult job to do and we should not be making it any harder."
Louise Haigh, a close ally of Mr Burnham, recently argued that any review of the tax system should "at a minimum" consider reforming the uplift. The proposals have sparked debate about their economic impact. Andrew Brooker, of Begbies Chartered Accountants, explained that the prospect of double taxation would disincentivise people from selling assets. He said: "Discouraging asset sales through very high tax rates doesn't make a great deal of economic sense either as it gums up markets."
Personal finance impact
Olly Cheng, from wealth manager Rathbones, criticised the proposals from a personal finance perspective, stating: "There was plenty of style but little substance." The reforms could significantly affect middle-class families who inherit property, potentially altering decisions about selling inherited assets and complicating estate planning.
