Key facts
- Kemi Badenoch announced Conservatives would abolish inheritance tax on family homes if elected.
- Couples would be able to leave an additional £1 million tax-free.
- The policy is estimated to cost £6 billion annually.
- The number of families paying inheritance tax would fall by more than half.
- Critics argue the plan prioritizes wealthy individuals and will deprive public services of cash.
Kemi Badenoch, leader of the Conservative Party, has pledged to abolish inheritance tax (IHT) on family homes and allow couples to leave an additional £1 million tax-free if her party is elected. The announcement was made during her keynote speech at the party's conference in Birmingham.
Badenoch stated her ambition is for a Conservative government to abolish IHT entirely "as soon as we can afford it," but acknowledged current spending commitments on defense, prisons, and the economy prevent immediate full abolition. She described the current IHT as a tax on "ordinary middle-class families" rather than the "super wealthy."
The proposed changes aim to cut every inheritance tax bill and reduce the number of families paying the tax by more than half. The Conservatives estimate the policy would cost around £6 billion annually, with savings identified in government spending, including welfare cuts.
Under current UK rules, estates exceeding £325,000, or £500,000 if a home is left to children or grandchildren, are subject to a 40% tax rate on assets above the threshold. In the 2023-24 fiscal year, IHT charges were levied on 4.72% of UK deaths, generating approximately £7 billion for the government.
The proposals have drawn criticism from opposition parties and tax justice advocates. Tax Justice UK called the plan a "reckless policy" that would deprive public services of much-needed funds. Stuart Adam, a senior economist at the Institute for Fiscal Studies, noted that the primary beneficiaries would be those with the highest wealth, particularly in London and the southeast. Reform UK suggested the policy would only affect a small percentage of homes, primarily in London. Labour's Bridget Phillipson accused the Tories of prioritizing the wealthiest over ordinary families struggling with social care costs.