There is a hefty tax most of us haven’t had to worry about until now – but growing numbers will be ensnared in its net and bills could go through the roof overnight.

The Government is reportedly eyeing up a capital gains tax (CGT) hike to raise some much needed cash.

You pay CGT when you sell something you own and make a profit on it. The Government demands a chunk of that profit, except in a few circumstances.

You don’t have to pay it if you sell your own home for more than you paid for it – but you do on any other properties you own. 

You don’t pay it on stocks and shares held in an Isa – but you do on all other investments. Even sales of classic cars, paintings and jewellery can incur a bill.

Now, with just over a month to go before the Budget, countless think-tanks, ministers and other organisations are calling for Chancellor John Healey to whack up capital gains tax so that it’s in line with income tax rates.

That would mean the rate for basic rate taxpayers would lift from 18 to 20 per cent and for higher rate taxpayers it would leap from 24 to 40 per cent.

It would mark the second hike in two years – the latest by former Chancellor Rachel Reeves came into force as recently as April.

CGT bills are already hitting new highs. A record £24.2billion was paid in 2024/25 – up 89 per cent in just one year.

At first, it was largely wealthier investors paying up. Now it’s smaller investors too as the CGT annual allowance was hacked back by the previous Conservative government from £12,300 to £6,000 and then £3,000 in rapid succession.

The number of people who paid it shot up by 45 per cent to 584,000 in 2024/25.

You may say that equalising with income tax is fair enough, that investors should pay as much tax as workers. 

After all, buying an asset, watching its value rise and then selling it hardly takes as much effort as toiling at work all day or night.

But a growing chorus of financial experts warn that investors need an incentive to take a chance with their cash and must be rewarded for their entrepreneurial spirit. Jason Hollands, at Evelyn Partners, is one of them.

‘Investing involves putting your capital at risk,’ he says. ‘There is no guarantee a business will succeed and investments can make a loss. That is very different to getting a salary.’

He points out that HMRC’s own modelling suggests that if CGT was raised by

10 per cent it would result in lower tax receipts because people would act to reduce their bills by, for example, sitting on assets rather than selling them.

In fact, figures released yesterday reveal this may already be happening. The CGT bill was £915million between April and August this year – down £8million on the same period a year earlier. But perhaps the worst part of a new CGT grab is that arguably it is a tax on inflation.

Say you bought a buy-to-let or holiday home ten years ago for £100,000 and sell it for £140,000 today. On paper you have made a £40,000 profit – on which the taxman will want a hefty slice.

But over that decade inflation has been running hot, which means that your property is worth no more in real terms than it was when you bought it. You haven’t made a profit at all.

So, if you’re worried you may be hit by another CGT attack in the Budget, what can you do?

First, it is rarely sensible to act on speculation – you don’t want to do things that you’d regret if nothing is announced on the Budget on October 28.

However, if you’re already in the process of or have decided to sell something that would incur a capital gain, it may be worth getting a wriggle on. 

When Reeves increased the CGT rates she did it overnight – there’s nothing to stop Healey doing the same.

I’m currently selling a property and admit I’ve been pretty lackadaisical about getting it tied up. But now, by hook or by crook, I’m determined to get it done by the Budget.

The rates may not go up but it’s a reasonably safe bet that they won’t go down.

If you hold investments outside of a stocks-and-shares Isa and have some of this year’s allowance left, you can sell them and buy them again in an Isa wrapper. 

This process is called Bed and Isa and can be taken care of by your investment platform.

If you’re married or in a civil partnership, you can also move assets between you to take advantage of both of your CGT allowances. This can also be helpful if one of you pays a lower tax rate.

Take advantage of your tax shelters – both Isas and pensions – when investing.

Investors may also consider selling shares gradually to take advantage of each year’s allowance. However, this needs careful consideration and ideally professional advice.

Finally – and this is not necessarily advisable but likely what countless people will do – you can hang on to your investments and belongings even if you no longer need them and it no longer suits you to hold them.

That’s because your capital gains tax bill currently dies with you. When you pass on assets, your loved ones will pay inheritance tax, not capital gains.

But let’s not shout that bit too loudly – or we risk a Chancellor one day eyeing up capital gains on estates, too.

What are your thoughts on the upcoming Budget?

rachel.rickard@dailymail.co.uk