Is Capital Gains Tax About to Change?

Capital Gains Tax Could Be Heading Higher. If You Are Already Considering a Trust, Is Now the Time to Review It?

Capital Gains Tax is back in the political spotlight. And for owners of residential investment property, commercial property and other assets carrying substantial unrealised gains, it is worth paying attention.

Prime Minister Andy Burnham and Chancellor John Healey are reportedly considering proposals that would bring Capital Gains Tax rates closer to Income Tax rates. One proposal currently being examined would take the highest CGT rate from today's 24% to as much as 45%, although importantly no decision has yet been made. (The Times)

Lord Kinnock has publicly argued for alignment between CGT and Income Tax, estimating that such a change could raise around £12 billion. Similar arguments have been advanced by other senior Labour figures. The Chartered Institute of Taxation has also identified CGT as one of the areas being discussed ahead of the Budget on 28 October 2026. (Tax UK)

So should property owners panic? Absolutely not.

But should those who are already considering substantial estate planning simply ignore what is happening until after the Budget? We don't think so.

Why this matters when putting property into trust

One of the areas frequently misunderstood in trust planning is Capital Gains Tax. Putting an asset into trust can itself amount to a disposal for CGT purposes.

HMRC's position is clear: where property is settled into a trust, the transfer is generally treated as taking place at market value, potentially creating a chargeable gain even though the property has not been sold for cash. (GOV.UK)

For the current 2026/27 tax year, individuals generally pay CGT at 18% or 24%, depending upon their taxable income, while trustees generally pay 24%. (GOV.UK)

Consider an investor who bought a commercial or residential investment property many years ago and is now considering settling it into an appropriate family trust. There could be a substantial latent gain sitting inside that property.

If the transfer crystallises that gain, the CGT rate applying at the time of disposal suddenly becomes extremely important. A movement from 24% towards 40% or 45% would clearly change the numbers materially.

But there is an important qualification

Not every transfer into trust results in an immediate CGT cheque being written to HMRC.

Depending upon the type of trust, the nature of the transfer and the client's circumstances, Gift Hold-Over Relief may be available.

Where applicable, the gain is effectively deferred and carried forward into the recipient's acquisition value rather than being taxed immediately. HMRC specifically recognises transfers to trustees as one of the common circumstances in which hold-over relief may potentially apply. (GOV.UK)

That means this is not as simple as:

“CGT might rise, therefore put everything into trust now.”

Good planning does not work like that.

The CGT consequences need to be calculated alongside Inheritance Tax, Stamp Duty Land Tax where relevant, existing borrowing, lender consent, income taxation, trust taxation and the client's wider succession objectives.

There is, however, another reason timing matters

We have seen before that governments do not necessarily give taxpayers months to reorganise their affairs following a Budget announcement.

When the main CGT rates were increased in the Autumn Budget of 2024, the new rates applied to disposals made on or after Budget Day itself – 30 October 2024. (GOV.UK)

That does not tell us what John Healey will do on 28 October. But it does demonstrate why waiting until the Chancellor stands up at the despatch box before beginning a complicated property and trust review may be leaving matters rather late.

Property valuations need establishing. Existing acquisition costs and improvements need calculating. The trust structure needs to be appropriate. CGT reliefs need considering. Inheritance Tax needs modelling. Mortgages, legal title and SDLT may also need examining.

These things should not be rushed simply because Budget Day suddenly arrives.

The iTrust121 view

At iTrust121 our position is straightforward.

Never create a trust simply because you are frightened that a tax rate might increase.

A trust should exist because it achieves proper family, succession, asset-protection and estate-planning objectives.

But where somebody already owns a significant residential or commercial property portfolio, has substantial embedded capital gains and is already considering placing assets into trust as part of long-term estate planning, there is a strong reason to review the position now rather than after the Budget.

There is no confirmed 45% Capital Gains Tax rate. There is, however, now enough political discussion around CGT to take the possibility seriously. And history has shown that, where CGT rates are changed, the effective date can be Budget Day itself. (Sky News)

The important question therefore isn't:

“Should I rush my assets into trust before CGT goes up?”

It is:

“If I already intend to undertake this planning, do I properly understand the tax position and the consequences of waiting?”

That is a very different question. And with the Budget now only weeks away, it is one worth asking.

iTrust121 – proper planning starts with understanding the objective, the structure and the tax consequences before anything is moved.