In light of recent economic shifts, including trade uncertainty and fiscal tightening, the Chancellor is widely expected to use the Autumn 2025 Budget to pursue further significant tax reforms.

This could include building on earlier changes to Inheritance Tax (IHT) on business and farming assets, pension rule adjustments, and a sharp rise in National Insurance. With public finances still under pressure, attention is turning to where additional yield could come from.

Donald Parbrook, a senior tax partner at Azets, believes returning to the shelved OTS reviews of Capital Gains Tax (CGT) and IHT could offer a fairer and more effective path forward.

He said: “Many of the OTS’s recommendations, dismissed in the wake of the Covid-19 crisis, remain relevant today – especially the proposal to remove the capital gains uplift on assets passed tax-free under IHT reliefs.

“The CGT uplift was originally designed to prevent double taxation on inherited assets. But when those assets pass IHT-free and the capital gain is wiped away, no tax is paid at all. That creates a loophole that undermines the integrity of the entire system.”

Worked example:

• If someone dies owning shares worth £1 million, which they originally bought for £500,000, and leaves them to a spouse, there is no Inheritance Tax due because of the spousal exemption. When the spouse later sells those shares, they pay no CGT because the base cost is reset to £1m on inheritance. This means a £500,000 gain is never taxed at all.

Donald Parbrook argues that IHT reliefs, including business and agricultural property reliefs, could be better targeted by linking eligibility to the involvement of both the deceased and the beneficiary in the business — an approach recently echoed by a House of Commons Committee reviewing proposed reforms. This would curb tax planning by passive investors while preserving genuine family succession.

Business Property Relief (BPR) was first introduced in 1976 to protect family businesses from inheritance tax – a principle that risks being eroded by poorly targeted reform.

He added: “It feels wrong that a relief introduced in 1976 to prevent families losing ownership of their business when passing from one generation to the next is now being undermined – while passive investors continue to benefit”.  “A better-targeted reform would ensure tax is paid by those not involved in the business succession, whether through a change in the IHT relief or removal of the CGT base cost uplift.”

There are also renewed calls to reintroduce indexation or taper relief within CGT to reflect inflationary gains – principles previously in place but later removed for individuals.

“Taxing inflation isn’t just unfair – it’s economically distorting,” Mr Parbrook added. “A return to basic fairness in the tax system could win public support even as revenue needs rise.”

He also pointed to broader structural issues. While the UK’s Corporation Tax rate sits at 25%, full expensing rules mean many large businesses pay little or no tax. A lower headline rate – more in line with international norms and potentially linked to domestic employment – could incentivise investment in UK-based activity more directly.

However, with 56% of public receipts already coming from Income Tax, National Insurance and VAT, small increases in headline rates could raise more than further tinkering with narrower taxes like CGT, IHT or fuel duty.

One particularly controversial area ripe for reform is the marginal 60% effective income tax rate for earnings between £100,000 and £125,140, due to the withdrawal of the personal allowance. In Scotland, this can rise to 69.5% once National Insurance is included.

“This kind of stealth taxation drives damaging behavioural change – from pension distortion to reduced NHS shifts by senior staff,” Mr Parbrook said. “It’s time for an honest conversation about rates, thresholds, and simplicity.”

Despite speculation around pensions and further IHT changes, Azets’ message is clear: clarity, fairness and simplicity must take priority.

Mr Parbrook concluded: “The Chancellor doesn’t need to reinvent the wheel – just pick up where the OTS left off. Tackle the obvious unfairness, stop taxing inflation, and if more revenue is needed, be transparent about it. That’s how you build confidence in the system.”