Conservative leader Kemi Badenoch MP has pledged to remove family homes from the scope of Inheritance Tax if her party is returned to power, she told the Conservative Party Conference today.
She says the party will abolish Inheritance Tax on the family home and raise the individual threshold to £500,000.
According to the Conservatives, this will mean that a couple can hand on their main home to direct descendants inheritance tax free plus a further £1m to anyone without any inheritance tax liability.
Ms Badenoch said this will replace the current thresholds of £325,000 per person, and a £175,000 further allowance for residential property.
She did not, however, say she would reverse plans by former Labour Chancellor Rachel Reeves to impose IHT on unused pensions from next April although she did say abolishing IHT completely was a long term aspiration.
She said: “We want to abolish inheritance tax altogether. But as an initial, and fully costed, first step, we are announcing these changes that the next Conservative Government will introduce. We will legislate to implement this change.”
The Conservatives have called IHT “a bad tax” and “morally wrong.”
Ms Badenoch said: “The Conservatives are and always have been the party of home ownership. We understand why putting roots down and having a stake in society matters.
“Our homes are where we watch our children take their first steps. They are where we gather every Christmas to put up the same decorations. Passing on your home to your family is one of the most human instincts of all. That is why the next Conservative government will legislate so nobody will ever pay Inheritance Tax on their family home.
“No Stamp Duty when you buy your home. No Mansion Tax when you live in your home. And no Inheritance Tax on your home when you pass it to your children or grandchildren. That is what the next Conservative government will deliver.”
She said IHT was a “form of double taxation” to take assets that people have purchased with income, which has already attracted tax, and then force them to pay, “even more to the state just because they have died.”
She added that the, “really wealthy” have always set up trusts, or taken other steps to shelter assets from Inheritance Tax.
Andrew Griffith MP, Shadow Chancellor, said: “Inheritance Tax is an immoral tax which punishes people simply for working hard, saving and leaving something behind for their children. As a first step towards abolishing the tax completely, we will scrap Inheritance Tax on the family home and lift the threshold for other assets to a million pounds for a couple.”
Initial reaction to the pledge has so far been positive.
Chartered Financial Planner Shaun Moore FPFS, tax and financial planning expert at Quilter, said: "The announcement is particularly significant given the changes due from April 2027, when unused defined contribution pension funds are expected to be brought into scope for inheritance tax.
"Take a married couple with a £1.2 million family home, £500,000 of ISAs and investment assets and £700,000 in pensions. If both were to die after April 2027, their combined estate could be worth £2.4 million. Under the current framework, their estate could face an inheritance tax bill of around £640,000 once available allowances have been used.
"Under the Conservative proposal outlined today, that same family could potentially see their inheritance tax bill fall from more than half a million pounds to nothing at all.”
"That said, there is no escaping the fact that this would be a very expensive tax cut. Inheritance tax receipts have ballooned in recent years as rising asset values and frozen thresholds have pulled more estates into the net. They are also expected to increase further once pensions become liable from April 2027.”