Andy Burnham as PM: CGT, inheritance tax and your wealth

What did we learn from Andy Burnham’s speech?

Burnham set out his approach to growing the economy and his commitment to the Government's fiscal rules. This focused on the central theme of devolution of power from London and Westminster and setting up a Number 10 of the North, with a 10 year ‘mission’ to improve living standards through three core tasks of reindustrialisation, reform of essential utilities, including housing, and regeneration of places. On tax policy specifically, beyond a passing mention of business rates reform to support pubs and the high street, the speech was silent.

That is not surprising. Without a leadership contest forcing his hand, Burnham is likely to want to preserve as much flexibility on tax as possible, taking advice from officials and reserving firm decisions for a Budget later this year. However, some key themes have emerged from his historic comments.  

What has been signalled on CGT, IHT and wealth taxes so far?

A recurring observation from Burnham is that the UK taxes work more heavily than wealth, and that this needs to be rebalanced.

While Burnham has not expressly proposed a general wealth tax, he has long advocated for the introduction of a Land Value Tax, which would rely on similar principles and would apply on an annual tax on the value of land, albeit applied in a more targeted way.

On inheritance taxes, he has previously proposed funding a National Care Service with a care levy of 10% payable on ‘everyone’s assets, savings and homes’. This has not been repeated since his emergence as a prime ministerial candidate.  More recently, however, The Telegraph has reported that he would “look again” at the Government’s curtailment of inheritance tax reliefs for farmers.

Burnham’s views on the taxation of wealth v labour also imply he may be open to reviewing Capital Gains Tax (CGT) rates. There has been much speculation over the past decade the main rate could be more closely aligned with higher Income Tax rates. However, other than a relatively modest uplift from 20% to 24% in October 2024, recent Labour and Conservative Governments have not made fundamental changes to CGT rates. Whether this is revisited remains to be seen. Wes Streeting, one of the potential chancellor candidates, has recently come out publicly in favour of such changes, albeit with concessions for genuine entrepreneurship and reinvestment.

Burnham has said he would keep to the 2024 Labour manifesto commitment not to raise the rates of income tax, VAT or National Insurance during this Parliament. This, combined with his intention to stick to the Government’s self-imposed fiscal rules around borrowing, means the levers available for Burnham to pull, outside spending cuts, will be limited when it comes to funding the policies previewed in his speech.

While it is difficult, therefore, to infer too much at this stage given the lack of detail available and the Treasury scrutiny of any thinking that has been trailed, what we do know points toward the taxation of assets, land and capital gains all potentially being on the agenda for a Burnham led Government.  

Although we may learn more over coming months, specifics are likely to be reserved for the next Budget. In the meantime, a summer of speculation seems likely.

What does this mean for business owners and others with private wealth?

While potentially impacted by any changes that follow, the immediate concern for business owners and individuals with private wealth will be navigating another period of uncertainty. A lack of clarity in the direction of tax policy, and assurance that existing rules and principles are settled, makes confident decision making difficult.

This will matter for those approaching major liquidity events and/or considering succession planning where tax costs can fundamentally alter economic outcomes. And while tax increases are one potential scenario, it is possible that changes could provide some respite in other instances. For example, entrepreneurs will be hoping that if Burnham were to “look again” at the recent changes to inheritance tax relief for agricultural property, that extends to the changes impacting business property.

What should I be thinking about now?

Faced with such uncertainty, there is unlikely to be one single right course of action in many cases.

In certain instances, particularly where something is already in motion, it may be that accelerating this to ensure certainty of tax treatment is desirable. On the other hand, there may be scenarios where a wait-and-see approach or, ensuring there is flexibility to pivot in different directions, is more appropriate.

Either way, understanding the options available early is important, as there may still be a window to act if needed.

Get in touch with Billy Chiverton or Dan Hartland to discuss your position.