Badenoch Unveils Plan to Scrap Inheritance Tax on Family Homes and Raise Tax‑Free Threshold to £1m

Key Tax Proposals and Fiscal Impact

Kemi Badenoch, the Conservative Party leader, delivered a keynote address at the party’s conference in Birmingham, laying out a bold agenda that centres on inheritance tax (IHT). She announced that a future Conservative government would legislate to ensure that no one pays IHT on their family home, a move she framed as a relief for ordinary middle‑class families across the country. In addition, couples would be able to pass on an extra £1 million tax‑free, a threshold that would dramatically reduce the number of estates facing the levy.

The policy, she said, would cut every IHT bill and lower the proportion of families paying the tax by more than half. Current rules mean estates worth more than £325 000—rising to £500 000 when a home is left to children or grandchildren—are subject to a 40 % rate on the amount above the threshold. Under the proposed changes, the government estimates a yearly cost of around £6 billion, while claiming it has identified £71 billion in savings through spending reforms, including welfare cuts.

Badenoch also revealed her longer‑term ambition to abolish IHT altogether, “as soon as we can afford it.” She justified the immediate focus on family homes by citing existing spending commitments on defence, prisons and the economy, which she described as “non‑negotiable priorities.” The speech was met with a mixture of applause and cautious optimism from party members, who gathered to hear what many saw as a decisive pivot after the party’s historic defeat in the 2024 general election.

Broader Policy Announcements

Beyond inheritance tax, Badenoch outlined a suite of additional measures designed to appeal to both traditional Tory voters and those who have defected to Reform UK. Among these were a £10 billion anti‑missile defence programme, the creation of 50 000 new prison places, and a plan to halve employer national insurance contributions for workers aged 21 to 24.

The government also pledged to eliminate the “cliff edge” that currently forces parents in England to lose childcare support once they earn more than £100 000 a year, a change intended to make the system more equitable. Another notable proposal was the scrapping of the High Value Council Tax Surcharge—often dubbed the “mansion tax”—which was slated to take effect from 2028 and would have imposed an extra levy on properties valued at over £2 million.

In a clear attempt to reclaim disaffected voters, Badenoch described her party as “the no‑drama party” and contrasted it with Reform UK, which she dismissed as “a circus.” She appealed to former Reform supporters, saying, “We let them down and we want them to come back home.” The speech also featured a series of jibes aimed at Labour figures, most notably branding “Paddington Bear prime minister” Andy Burnham as someone who “hoped the problems would just go away.”

Reaction from Opposition Parties

Opposition parties wasted little time in criticising the Conservative proposals. Labour Party chairwoman Bridget Phillipson accused the Tories of prioritising the wealthy, stating, “Kemi Badenoch has shown that the Tories’ choice is to do nothing to help ordinary families struggling with the cost of social care, prioritising the wealthiest instead.”

Reform UK’s economy spokesman, Robert Jenrick, dismissed the inheritance tax plan as “chicken‑hearted” and claimed it favoured “the 2 %.” He contrasted the Tory approach with Reform’s own policy of giving every individual a £500 tax cut by raising the personal allowance to £15 000, arguing, “The Tory Party is looking after its own in Kensington, Reform is looking after the country.”

Liberal Democrat leader Sir Ed Davey labelled the speech as “lecturing the country on fiscal responsibility while making tens of billions in unfunded promises.” Green MP Carla Denyer echoed similar concerns, describing the Conservatives as “pro‑billionaires, pro‑inequality and pro‑damaging the environment.”

Why it Matters

The inheritance tax pledge marks a strategic attempt by the Conservatives to reposition themselves as a party that supports middle‑class aspirations, a narrative that could be crucial in a tightly contested electoral landscape. By targeting a tax that many voters perceive as burdensome on family homes, Badenoch aims to win back the “soft centre” while simultaneously signalling fiscal discipline through claimed savings of £71 billion. However, the plan’s credibility hinges on the feasibility of those savings and the political cost of welfare cuts, raising questions about how the £6 billion annual expense will be balanced. The broader policy package—ranging from defence spending to prison expansion—reflects an effort to portray the Tories as a “no‑nonsense” government capable of delivering concrete results. Yet, the sharp rhetoric directed at Reform UK and Labour underscores a deepening polarisation, suggesting that the upcoming election may well revolve around competing visions of economic fairness and national identity. How Badenoch’s proposals resonate with voters will likely determine whether the Conservatives can reverse their recent fortunes and reclaim a leading position in British politics.