Plans are reportedly underway within the Conservative party to abolish inheritance tax if Kemi Badenoch secures victory in the next general election, according to party sources cited by the Mail on Sunday. This potential move aims to sharply differentiate the Conservative platform from the tax increases being introduced by the Labour party.
Inheritance tax is currently levied at 40% on estates exceeding a threshold of £325,000. This tax-free allowance can increase to £1 million when a primary residence is passed down and when married couples transfer their unused allowances to each other. Abolishing this tax is estimated to cost approximately £9 billion, with the funds anticipated to be sourced from reductions in the welfare budget.
The policy, if adopted, could be announced at the Conservative party conference scheduled for next month in Birmingham. Sources close to Badenoch indicated that the party's policy platform is still under development. The proposed abolition of inheritance tax would echo a past Conservative initiative, when George Osborne announced at the 2007 party conference that a future Conservative government would raise the inheritance tax threshold to £1 million from £300,000.
This strategic policy move is also viewed by some of Badenoch's aides as a potential deterrent against Prime Minister Andy Burnham calling an early general election, given the Conservative Party's current state of preparedness. Last year, Badenoch successfully kept her plans to cut stamp duty confidential before her conference announcement, a tactic credited with bolstering her leadership.
Senior sources within Badenoch's office have expressed a desire for the upcoming conference to generate significant momentum, building on a recent successful re-shuffle of the shadow ministerial team. Badenoch has previously stated that abolishing the 'death tax' is a high priority and confirmed that internal research is underway to assess its affordability, aligning with the party's commitment to fiscal responsibility.
Andrew Griffith, the party's Shadow Chancellor, has also voiced his opposition to inheritance tax, stating in a past address to the TaxPayers' Alliance that it would be the single tax he would scrap if given the opportunity. He also noted Britain could look to Sweden's example after that country abolished its inheritance tax.
Polling data suggests public support for reducing inheritance tax. A poll conducted for the Adam Smith Institute indicated that 45% of Britons are against inheritance tax, with only 25% in favor of its current form. John O'Connell, chief executive of the TaxPayers' Alliance, described inheritance tax as one of the most unfair taxes, penalizing families for saving and investment. James Lawson, chairman of the Adam Smith Institute, advocated for its abolition, arguing it causes significant damage for minimal revenue and disproportionately affects family businesses.
A Conservative spokesperson commented that no policy decisions for the conference have been finalized and that any claims of knowing the announcements are unfounded. The spokesperson acknowledged Badenoch's stated desire to cut taxes, particularly inheritance tax, but emphasized that, unlike Reform, the Conservatives do not announce policies without full costing and specific savings, adhering to their 'Golden Economic Rule'.