Badenoch: Tories would abolish inheritance tax on family homes
Andrew Griffith, the Tories’ shadow chancellor, described the plan as “a first step towards abolishing the tax completely”.
Kemi Badenoch has pledged that a Conservative government would abolish inheritance tax on the family home, in a policy the party announced on 7 October.
The Conservative Party said the change would also lift the tax-free threshold on other assets. The individual threshold would rise to £500,000. That would replace the current £325,000 per person and the further £175,000 allowance for residential property. In the party’s account, a couple could then pass on their main home to direct descendants free of the tax, and “a further £1,000,000 to anyone without any inheritance tax liability”.
Badenoch, the Conservative leader, said “the next Conservative government will legislate so nobody will ever pay Inheritance Tax on their family home”. She added that “passing on your home to your family is one of the most human instincts of all”.
Counted for two people, the current £325,000 threshold comes to £650,000. The party’s £500,000 comes to £1,000,000.
The case the party makes
Andrew Griffith, the shadow chancellor, called inheritance tax “an immoral tax which punishes people simply for working hard, saving and leaving something behind for their children”. The party’s statement describes it as “a form of double taxation”, and says rising house prices over thirty years have turned it into “a postcode lottery”.
The statement also sets the plan against Labour, which the party says is widening the inheritance tax net to take in family farms, pensions and family businesses.
The party said the package is “fully costed”. Griffith said the party can make the commitment because of plans to “grip public spending”, especially the welfare bill. The statement gives no cost figure. It does not say how many estates would stop paying the tax, or when a Conservative government would bring the change in.
It describes the move as an “initial” step, adding: “We want to abolish inheritance tax altogether.”
What the rules say now
GOV.UK says there is normally no inheritance tax to pay if an estate is below the £325,000 threshold, or if everything above it goes to a spouse, civil partner or charity. The threshold can rise to £500,000 for someone who gives their home to children or grandchildren.
The standard rate is 40%, charged only on the part of an estate above the threshold. GOV.UK’s own example is an estate worth £500,000, with a £325,000 threshold. The tax is 40% of £175,000. That comes to £70,000.
The tax is paid from the estate to HM Revenue and Customs by the person dealing with it, known as the executor. Beneficiaries do not normally pay tax on what they inherit, GOV.UK says.