FOR many middle-aged couples, wealth is no longer limited to earnings and pensions. Increasingly, families own a main residence, perhaps a holiday cottage or rental property, and may have inherited assets from parents or other relatives.

As property values have risen over recent decades, Capital Gains Tax (CGT) has become an important consideration when planning for the future.

The good news is that the sale of your principal private residence is normally exempt from CGT. If you sell the family home in which you have lived throughout your ownership, any gain will generally be tax-free.

The position is very different for second homes. A holiday cottage, buy-to-let property or inherited house that is not your main residence may attract CGT when sold. The tax is charged on the increase in value between acquisition and disposal, after deducting allowable costs such as purchase expenses, legal fees, stamp duty and certain capital improvements.

For the 2026 to 2027 tax year, each individual has an annual CGT allowance of only £3,000, a dramatic reduction from the £12,300 allowance available only a few years ago. Married couples and civil partners can each utilise their own allowance, giving a combined exemption of £6,000. Gains above that level are generally taxed at 18 per cent or 24 per cent, depending on the taxpayer’s income level.

Inheritance often creates unexpected CGT issues. Whilst inherited assets usually benefit from a tax-free uplift in value on death for CGT purposes, any increase in value after inheritance may become taxable when the asset is eventually sold. Beneficiaries who retain inherited property for several years can therefore face significant gains.

Planning opportunities do exist. Transfers between spouses and civil partners are generally free of CGT, allowing ownership to be rearranged before a sale to maximise the use of both annual allowances and potentially lower tax rates. Early professional advice can often produce substantial savings.

Looking ahead, taxpayers should be alert to possible future changes. The Government has already increased CGT rates in recent years and significantly reduced the annual exemption. Although no major CGT changes were announced in the 2025 Budget, commentators continue to speculate that future governments may seek to align CGT rates more closely with income tax rates, particularly for higher earners. Such a move could substantially increase the tax burden on second-home owners and those with significant investment gains.

Inheritance Tax (IHT) is also under increasing scrutiny. The nil-rate band remains frozen at £325,000, with additional allowances available where a family home passes to direct descendants. As property prices continue to rise, more families are finding themselves drawn into the IHT net than ever before.

The message is clear: families with multiple properties or inherited assets should not assume that today's tax rules will remain unchanged. Regular reviews of asset ownership, wills and succession plans can help ensure that valuable family wealth is preserved for the next generation rather than lost unnecessarily to taxation.