Conservative Party leader Kemi Badenoch has pledged significant changes to inheritance tax (IHT), including exempting family homes from the levy and increasing tax-free allowances, in an effort to rebrand the party as "no-nonsense" and win back public trust.
Speaking to party members, Badenoch framed the upcoming general election as a "battle for the soul of the nation." She acknowledged the party's current polling deficit, comparing the situation to Marks and Spencer adapting its brand to regain customers. "Just like M&S, we must learn from our mistakes, win back trust and make people feel good about our party again," she stated.
Badenoch announced that a future Conservative government would legislate to ensure no one pays inheritance tax on their family home. Additionally, couples would be able to leave an extra £1 million tax-free, a move the party estimates would cut every inheritance tax bill and reduce the number of families paying the tax by more than half. The estimated annual cost of these changes is around £6 billion, which the party suggests can be covered by identified savings of £71 billion in government spending, including welfare cuts.
Under current rules, estates valued above £325,000, or £500,000 if a home is left to direct descendants, may be subject to a 40% tax rate on assets exceeding the threshold. In the 2023-24 fiscal year, IHT charges applied to 4.72% of UK deaths, generating approximately £7 billion for the government.
Badenoch also expressed an ambition to abolish inheritance tax entirely "as soon as we can afford it." The proposed changes were met with immediate criticism from opposition parties. Labour Party chairwoman Bridget Phillipson asserted that the Tories have not changed, accusing them of prioritizing the wealthiest over ordinary families struggling with social care costs. Reform UK economy spokesman Robert Jenrick claimed Badenoch had "chickened out of doing anything big" and is focused on a small percentage of the population, contrasting the Conservative proposals with Reform's pledge for a £500 tax cut for everyone by raising the tax-free personal allowance to £15,000.
Badenoch also used her speech to highlight other recent policy announcements, including a £10 billion anti-missile defence system, plans for 50,000 new prison places, and halving employer national insurance on earnings for individuals aged 21 to 24. The party also intends to scrap the "cliff edge" that penalizes parents earning over £100,000 annually for childcare support and plans to eliminate the High Value Council Tax Surcharge, or "mansion tax," set to take effect in 2028 for properties valued over £2 million.
Liberal Democrat leader Sir Ed Davey criticized Badenoch for making "tens of billions in unfunded promises" while discussing fiscal responsibility. Green MP Carla Denyer echoed this sentiment, stating that the Conservative Party, under Badenoch, continues to define itself as "pro-billionaires, pro-inequality and pro-damaging the environment."