Households spooked by reports that the capital gains tax could be scrapped should take the speculation as a planning measure, not a reason to cash out immediately, financial experts have warned.
The intervention from the personal finance company thimbl follows reports suggesting that the future government may remove the lifting rule, where the person who inherits the property is considered to receive it at its market value on the day of death rather than the amount originally paid. Abolishing it could leave some families facing huge tax bills when they sell their inherited home.
The reports come amid a heated debate about how Britain taxes wealth, with the Treasury already weighing changes to inheritance and capital gains tax and the question of wealth now hanging over British business sharpening the focus on families, estates and succession plans.
For business owners, whose fortunes are often tied to bricks and mortar and whose locations can blur the line between family and firm, the temptation to act first and think later is understandable. And, experts warn, it’s often a bad instinct.
Joe, financial expert at thimbl, said: “Whenever reports show that families could face higher tax costs, it’s understandable that people feel worried, especially when it involves something as important as a family home.
“While these are currently reported proposals rather than confirmed policy, they are a useful reminder that families should review their broader financial plans instead of waiting until major tax changes are announced.”
The biggest risk for many families, he says, is not the tax itself but the lack of preparation. Inheriting property already brings a series of hidden legal, administrative and financial costs that catch families off guard, from probate fees to insurance and maintenance.
He said: “For many families, the biggest challenge will not be the tax itself, but the fact that many people are simply not prepared to deal with the unexpected costs that may arise when dealing with the property.
“Inheriting property already comes with legal, administrative and financial obligations. If future tax laws were to change, planning ahead and understanding the potential financial implications would be even more important.”
His stern warning is reserved for those who are tempted to reframe their stories on the topic.
He said: “It is a big mistake to make decisions before the facts are known, headlines can cause concern, but proposed policies often change during consultation and before they become law.”
“Making hasty decisions about selling assets, transferring assets or changing long-term financial plans based on speculation can sometimes cause more harm than good.”
Instead, he suggests that families use the attention as a nudge to get their house in order, by all means. Under current laws, beneficiaries generally do not owe tax on inheritance, but capital gains tax can apply when inherited assets are later sold, making understanding the status of inheritance even more important now.
Joe said: “This is a great opportunity to be organized rather than panic. Make sure important financial documents are up to date, understand which assets are part of your family’s inheritance and have open discussions with relatives about long-term financial planning.
“If the proposals go ahead, people who already have a better understanding of their financial situation will be in a stronger position to seek professional advice and make informed decisions.”
Summarizing, he added: “The reports will understandably attract attention because they involve family wealth and inherited property, but it is important to remember that there is a difference between the proposed changes and the confirmed law.
“Instead of reacting to today’s headlines, people should use them as a stepping stone to review their long-term financial plans, understand where they may be exposed to future costs and seek advice if they are unsure of how potential changes will affect them.”
