UK Budget: Healey Plans Income Tax on Family Business Transfers

By GlobalDeskNews Staff | October 19, 2026

Chancellor John Healey is drawing up plans to charge income tax — rather than capital gains tax — on transfers of family businesses to the next generation, the Telegraph reported on Sunday. The report, carried by Reuters on Monday 19 October, lands nine days before his first Budget on Wednesday 28 October. Nothing is confirmed: this is a newspaper report of plans under consideration, not announced policy.

Quick Answer: The Telegraph reported on 18 October that Chancellor John Healey plans to tax family business transfers as income — rates of 20 to 45 per cent — instead of capital gains tax at 18 or 24 per cent. It could be unveiled at the Budget on 28 October, but the Treasury has not confirmed it.

What the Telegraph reported

According to the Telegraph, Healey is working on a measure that would reclassify the handover of a family firm — typically shares gifted from parents to children — so that it is taxed as income rather than as a capital gain. Right now, families can structure these transfers so they attract capital gains tax, which is charged at a lower rate.

The Treasury hasn't denied the story. Its standard line is that "decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals." Healey said much the same in September: "If I respond to those questions, I'm only going to fuel more speculation."

And there's a reason the speculation is swirling. Healey faces pressure to raise billions at his first Budget to offset higher borrowing costs and fund Prime Minister Andy Burnham's plans for social care and defence. But he is bound by Labour's 2024 manifesto pledges not to raise the rates of income tax, VAT, corporation tax or National Insurance — which leaves capital taxes, property taxes and reliefs as the remaining room to manoeuvre.

How family business transfers are taxed in the UK now

Here's what matters most: when a business owner gifts shares, HMRC treats it as a disposal at market value — even though no cash changes hands. That would normally trigger capital gains tax at 18 per cent for basic-rate taxpayers or 24 per cent for higher-rate taxpayers.

Gift holdover relief (under section 165 of the Taxation of Chargeable Gains Act 1992) lets owner and recipient defer the gain: the children inherit the shares at the donor's original base cost, and the tax bites only when they eventually sell.

The reported plan would cut through all of this: 20, 40 or 45 per cent instead of 18 or 24. HMRC has already been consulting on taxing some capital transactions as income — the Association of Taxation Technicians has warned it could create barriers to succession planning.

Why the farm row makes this politically explosive

It comes while Healey is still dealing with Labour's inheritance tax raid on family farms: Rachel Reeves imposed the tax on farms worth over £1 million in her 2024 Budget, and after months of tractor protests the threshold was raised to £2.5 million — £5 million for a married couple.

That climbdown hasn't calmed the countryside: 89 per cent of the 700 rural businesses in a CLA survey have paused investment, and CLA deputy president Joe Evans says the Budget should be "an opportunity for a full reversal" of the tax. Firms beyond farming are organised too: a coalition representing more than 200,000 UK businesses wrote to Healey this autumn urging him to reverse the reforms.

Why it matters

Family businesses are not a niche interest: more than 90 per cent of all UK businesses and 57 per cent of the workforce, per research cited by Family Business UK. A change that makes succession materially more expensive affects who buys businesses when owners retire — advisers warn it pushes sales toward private equity rather than the next generation, while raising more from each handover.

10 Downing Street in London, the official residence of the UK Prime Minister, during the October 2026 Budget build-up — 10 Downing Street. Prime Minister Andy Burnham's government has pledged not to raise the headline rates of income tax, VAT, corporation tax or National Insurance — limiting where Budget revenue can come from. (Photo: A1Cafel via Wikimedia Commons, CC0)

What happens next

So what happens now? We wait nine days. The Budget is on Wednesday, 28 October, and Healey has given no public signal that this measure will be in it. Advisers agree on one thing: don't restructure on the basis of a newspaper report — rumours are a poor reason to move assets. But a newspaper report is also not a measure, and budgets are full of floated ideas that die in the Treasury's final calculations. Until 28 October, this remains reported — not decided.

Key Takeaways

The Telegraph reported on 18 October that Healey is drawing up plans to tax family business transfers as income, ahead of the 28 October Budget — nothing is confirmed.
Transfers currently attract capital gains tax at 18 or 24 per cent, often deferred via gift holdover relief; income tax could mean 20, 40 or 45 per cent.
Healey must raise billions while bound by pledges not to raise income tax, VAT, corporation tax or National Insurance — capital taxes are the likely hunting ground.
The report lands amid the farm inheritance tax row, where 89 per cent of rural businesses have paused investment, per the CLA.
Groups representing over 200,000 firms are lobbying Healey to reverse inheritance tax changes they say damage family succession.

Frequently Asked Questions

Will family business transfers be taxed as income under the new plan?

Not yet — and possibly never. What exists is a Telegraph report, carried by Reuters, saying Chancellor John Healey is drawing up such plans for the 28 October Budget. The Treasury has not confirmed it and says it does not comment on speculation. Until Healey announces it at the Budget, it remains a reported proposal.

When is the UK Budget 2026?

The Budget will be delivered on Wednesday, 28 October 2026. It is John Healey's first Budget since becoming Chancellor. He announced the date by video message, promising a Budget that "moves money and power out of Westminster, and into every postcode around Britain," while warning the public to expect tough decisions.

How are family business transfers taxed in the UK now?

Gifting shares is treated as a disposal at market value, which would normally trigger capital gains tax at 18 or 24 per cent. But gift holdover relief usually defers the gain: the children inherit the donor's original base cost, and the tax falls only when the shares are finally sold.

What happened with the inheritance tax on family farms?

Rachel Reeves' 2024 Budget ended the inheritance tax exemption for farms worth over £1 million; after protests, the threshold rose to £2.5 million (£5 million for couples). Farmers say it still doesn't cover their assets — 89 per cent have paused investment, per a CLA survey — and want Healey to scrap the tax.

Why is Healey reportedly targeting family firms?

He must raise billions — Barclays' private banking arm puts the gap at £36 billion — but Labour's 2024 manifesto pledged not to raise income tax, VAT, corporation tax or National Insurance rates, leaving capital taxes, property taxes and reliefs as the remaining places to look.

How much more tax could income tax mean versus capital gains tax?

Capital gains tax runs at 18 per cent for basic-rate and 24 per cent for higher-rate taxpayers; income tax runs from 20 to 45 per cent. For a higher-rate taxpayer, taxing a transfer as income rather than a capital gain could roughly double the bill — the exact effect would depend on any measure's detail.