What to do ahead of the 2026 Budget

In this article, we look at the Budget rumours, try to predict where the dice may land and, perhaps more importantly, suggest a few ideas to help you successfully survive Budget speculation season.

This year, the Budget takes place on 28 October, and it will be John Healey's first outing as Chancellor, so the surprise factor may be even higher than normal.

Speculation season

Recent Budgets have generated a whole industry of pre-Budget speculation, and it is to be hoped that the 2026 season will be calmer – although many commentators have already put pen to paper.

So what are the rumours, and how should you respond to them?

Capital gains tax

A rise in the capital gains tax (CGT) rate, potentially aligning the CGT and income tax rates, is being widely tipped as a possibility.

Strong rumours of a change ahead of the 2025 Budget proved to be unfounded, and the Chancellor will know that aggressive increases in CGT rates can influence behaviours, such as investors choosing not to dispose of assets.

For this reason, many commentators consider that, if there is to be an increase, the maximum rate would rise to around 28% rather than aligning CGT rates with income tax.

Other rumours circulating around CGT include the possibility of abolishing the tax-free uplift on death, which means gains built up during a person's lifetime effectively disappear for CGT purposes when they die.

There has also been speculation about changes to the CGT exemption for main homes, although one always doubts if any Chancellor would really have the appetite for that. The rumour of an 'export charge', to prevent individuals moving offshore to escape a CGT bill, has also been mentioned by some commentators.

Pre-Budget CGT Planning

So what would be a prudent strategy in light of the CGT rumours and speculation? Clearly, much will depend on a taxpayer's specific circumstances, but we hope that the following may help you form your thoughts.

First, remember nearly all the speculation is just that – speculation. Despite the quality of many of the commentators, they don't know for sure. Rumours often prove unfounded and even where they materialise, there may be reliefs or rebasing provisions that mitigate (or even improve) the position.

Acting on speculation alone seldom proves to be a good decision.

That does not mean that some pre-Budget adjustment shouldn't be considered. If you have assets you were planning to sell, then doing so before Budget Day may be sensible – normally the key date is the date of the contract of sale and not the completion date.

Similarly, if assets currently qualify for gift relief, meaning no CGT is due when they are given away, it may be worth completing the transfer before Budget Day (see also the discussion below on succession planning). Furthermore, if you have capital losses, consider using them now in case they are capped or restricted in the Budget.

It is also worth considering how an asset fits into your longer-term wealth plans. If you intend to hold it for many years, triggering a tax charge now simply to pre-empt a possible Budget change may not be the right approach. The forthcoming introduction, from April 2027, of an inheritance tax charge on pensions may also be a material consideration here. Many taxpayers may now draw on their pensions, perhaps deciding to let other investments grow over the longer term.

Inheritance tax and wealth taxes

This is perhaps the area where speculation is the most difficult but pre-Budget planning is the most sensible.

Inheritance tax (IHT) is always on the Budget death row, but it is the great survivor. The fundamentals have changed very little for over 40 years.

This year, even the most publicity-focused analysts have struggled to call what will happen. Predictions range from cutting IHT to 10% to retaining it while abolishing the CGT uplift on death (see above).

The IHT regime at present is very favourable. IHT was once described as a "voluntary tax" and, although the number of estates paying IHT continues to rise, the IHT rules favour lifetime planning. If Budget changes are a concern, it may be prudent to use existing IHT exemptions to make lifetime gifts.

Gifts to most individuals are tax free if the person making the gift survives it by 7 years. Gifts out of excess income can also be tax efficient. Trusts and family investment companies can be suitable holding vehicles to receive gifts, subject to tax advice, while also facilitating future control over the investment and use of the gift.

Life assurance, designed to provide funds to discharge IHT liabilities, is also becoming an increasingly popular way of mitigating exposure to IHT and is immune to law changes. Your Rothschild & Co client adviser can provide fuller details around IHT and connect you with an appropriate tax adviser.

In recent years, the possibility of a wealth tax has also been a regular talking point in Budget predictions. Wealth taxes have a chequered history across the globe – they can be difficult and costly to administer and seldom prove to be successful as a revenue raiser.

They also take time to plan and, this year at least, time will not be a commodity the Chancellor has at his disposal. The likelihood of a wealth tax is therefore considered to be remote.

Property

Prime Minister Andy Burnham has previously said that "land is undertaxed". Changes are already in line for property owners ahead of the Budget. From April 2027, the top rate on rental income will rise to 47% and a new annual surcharge on English residential properties valued at £2m or more is anticipated in April 2028.

Property is attractive to Chancellors because it is visible and immobile and a difficult asset to plan with, so one cannot rule out further Budget changes. However, time to prepare these is again short, and so one might anticipate that significant changes (e.g. to stamp duty) would be deferred until later Budgets.

Property used personally can be tricky to plan with — the CGT and IHT rules favour direct ownership — but it may be appropriate to hold residential properties in a corporate structure, subject to obtaining tax advice.

Income tax

Some commentators are predicting a new top income tax rate of 50% (although this would break a key pledge in Labour's manifesto) and an increase to the tax rate on dividends.

Again, these are just rumours, but if consistent with wider objectives, it may be prudent to pay dividends pre-Budget. The golden rule of tax planning (always use reliefs and exemptions) is also relevant here, so make sure family members have sufficient income to use their allowances.

Investments and wrappers

The Prime Minister is known to be of the view that earned income should, from a tax perspective, be treated more favourably than investment income, so we may see a shift along these lines. Some readers may recall – or at least have read about – the investment income surcharge, which was abolished in the mid 1980s.

It is difficult, and probably unwise, to forward plan for future income receipts or capital gains. However, the prospect of tax changes is a useful reminder to consider tax-efficient 'wrappers' to hold investments.

A wrapper allows investments to grow in a tax-efficient manner and can enable taxpayers to ride out a period of higher tax rates. No changes are anticipated in the rate of corporation tax, and as a consequence, family investment companies (or FICs), which enable families to hold investments in a tax efficient environment, are likely to retain their popularity.

Pre-Budget rumours around pensions changes have been more mooted than usual this year and, in any event, many taxpayers are already reviewing their position in light of upcoming IHT changes (see above).

Final thoughts

Speculation will grow as Budget day approaches. However, a calm and considered approach is often the best antidote to Budget fever.

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