The government is reputedly planning to increase the amount of money it raises in inheritance tax (IHT), alongside a rise in capital gains tax (CGT) on share sales, in the Budget later this month, according to reports.

Chancellor, Rachel Reeves, is assessing options to help close a £40bn funding gap as part of the Budget, with speculation around IHT and CGT having raged for weeks.

Reports from the BBC stated that Reeves is targeting IHT, but that it was not known how many people were likely to be paying more in the tax, or how much more they would pay.

However, it said that it understood that the Prime Minister, Keir Starmer, and Reeves were considering several changes to the tax, which currently includes multiple exemptions and reliefs.

“There have been reports that IHT exemptions are in the Chancellor’s sights as she scopes out potential tax-raising targets in the Budget later this month,” commented Hargreaves Lansdown head of personal finance, Sarah Coles.

“This will strike fear into the hearts of one in 10 retired people, who say this is the Budget move that they were dreading the most.

“It’s hardly surprising. The fact that so few estates pay IHT owes an enormous amount to these exemptions, so if the government tweaked some of the big hitters it would be devastating for millions of families.”

Meanwhile, according to reports in The Times, Reeves is likely to target an increase in CGT on the sale of shares in the upcoming Budget.

It stated that Reeves was not looking at raising CGT on second homes, as former Treasury officials believed the 24 per cent CGT rate for property sales was already at a maximum revenue level for the Treasury.

Therefore, The Times reported that the 20 per cent rate on the sale of shares could rise by “several percentage points”.

Commenting on the reports, Quilter tax and financial planning expert, Rachael Griffin, said: “As Labour prepares to unveil its first budget later this month, CGT is firmly in the spotlight. An increase in CGT no longer seems to be a question of ‘if’, but rather ‘when’ and ‘by how much’.

“Reports suggest that Chancellor, Rachel Reeves’, budget will include a “several percentage point” increase in CGT for sales of shares and other assets, while notably excluding second homes and buy-to-let properties.

“Currently, the CGT rate for sales of shares stands at 20 per cent. There had been speculation that this rate could be hiked to as high as 39 per cent, a figure that was recently dismissed by the Prime Minister. Instead, a more modest increase appears to be on the cards.

“A comprehensive reform of CGT may have been deemed too complex and time-consuming for the Chancellor to tackle immediately. Therefore, raising rates could be seen as a temporary measure aimed at boosting government revenues in the short term.

“However, the effectiveness of this approach is debatable. The key question is whether higher CGT rates will actually generate more tax revenue or simply alter investor behaviour.

“Without a delay before implementation, higher CGT rates might encourage individuals to hold onto their assets longer, rather than triggering an immediate surge in tax revenue. Additionally, it could lead to increased use of tax-efficient products such as ISAs and investment bonds.”

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