Full Breakdown
Proposed Abolition of Inheritance Tax Gains Momentum in UK Political Debate
By Drooid · · How we work
Core Event
Conservative Party leadership candidate Kemi Badenoch is signalling that, should the Conservatives return to power, she would move to abolish inheritance tax (IHT). IHT currently levies 40 % on the value of an estate above the £325,000 threshold, though fewer than five per cent of estates pay the tax.
Background & Context
The debate resurfaces amid concerns about Britain’s housing market and an ageing population. A report by Professor Ben Ansell for the Institute for Public Policy Research (IPPR) warns that by 2075 people over 65 will comprise 27 % of the population, driving a large share of future fiscal costs. Older households own a disproportionate amount of housing wealth, a legacy of low-interest rates and limited new-build supply.
Data & Statistics
- IHT generates roughly £9 billion for the Treasury each year, less than 1 % of total HMRC revenue.
- Less than 5 % of estates currently pay IHT.
- The Office for Budget Responsibility projects combined IHT and capital gains tax receipts could rise to 1 % of GDP by 2030/31 and 2.2 % of GDP by 2075/76 as the over-80 population grows from 5 % to 12 % of the total.
- A poll cited by Conservative-aligned commentary shows 54 % of Britons now support full abolition of IHT, up from 49 % the previous year.
- Raising the IHT threshold to £1 million would cost about £3.1 billion; a £500,000 increase is projected to cost around £700 million. Full abolition is said to benefit the top 1 % of earners with an average tax cut of £1 million.
Official Statements & Responses
- Kemi Badenoch argues that cutting IHT would help “ordinary families” build generational wealth and claims the tax mainly affects “home-owning middle-class families,” not the super-wealthy.
- Andrew Griffith, former shadow chancellor, has highlighted Sweden’s model—no stamp duty, no wealth tax, and no inheritance tax—as a potential inspiration for Britain.
Criticism & Opposition
The TaxPayers’ Alliance calls for total abolition, labeling the levy “distortionary, unfair and very unpopular.” Critics note that abolishing a tax that affects fewer than five per cent of households could appear to favour the ultra-wealthy, echoing concerns after the 2022 mini-budget.
Verbatim Quotes
- “The Tories said they’d cut inheritance tax before, only to seize £84bn from grieving families in death taxes,” — Robert Jenrick
Conflicting Reports & Gaps
Sources differ on the fiscal impact of raising the IHT threshold versus full abolition. One analysis estimates a £3.1 billion cost for a £1 million increase, while another projects a £700 million cost for a £500,000 increase. No source provides a definitive projection for how additional IHT receipts would be allocated by a future government.
What’s Next
Badenoch is expected to announce her tax-cut plan at the upcoming Conservative conference, potentially making abolition of IHT a centerpiece of the party’s election platform. Reform UK is promoting an alternative policy to raise the personal income-tax allowance to £15,000, which it claims would benefit 40 million people. The outcome of the Holborn and St Pancras by-election may trigger an early general election, further shaping the policy landscape.
