Conservative leader Kemi Badenoch pledged to more than halve the number of people paying the UK’s inheritance tax, as she seeks to re-establish the opposition party’s tax-cutting credentials and draw clearer lines with Labour and Reform UK.
Badenoch said she would exempt family homes from inheritance tax and increase to £1 million ($1.3 million) the value of other assets that couples can bequeath tax-free. The Tory leader framed it as part of a broader package of measures to support homeownership, following a pledge last year to abolish stamp duty on house purchases.
“The Conservatives are and always have been the party of home ownership,” Badenoch told her party’s annual conference in Birmingham. “This is my guarantee: 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.”
The proposal was the latest in the Conservatives’ efforts to rebuild their political brand after suffering the most comprehensive election defeat in the party’s centuries-old history in 2024. The party has sought to get back to basics at its four-day conference, including promising a raft of tax cuts, even as Badenoch moves the Tory agenda on things like immigration and the environment further to the right.
Badenoch said she couldn’t immediately endorse the full abolition of inheritance tax — something that she had declined to rule out in interviews and appearances ahead of the speech — although the party has billed today’s announcement as a “first step” toward scrapping it altogether. “Conservatives will not announce a tax cut without telling you how we are going to pay for it,” she said.
Currently, couples have a tax-free inheritance allowance of £325,000 each, plus £175,000 each for their primary home. The proposal would raise the former to £500,000 each and exempt primary homes of any value. The party said the policy would cost £6 billion, citing calculations by Oxford Economics for right-wing think tank Onward. The Tories also said it would take six in ten estates out of paying inheritance tax in 2029-30, partially reversing an increase in estates set to be subject to the levy between now and then.
The Conservatives plan to make up for the lost revenue with a package of £70 billion of savings, half of which would come through cuts to welfare, although some economists questioned whether exempting homes from inheritance tax could encourage people to shift assets into property and away from other taxable streams. That would make the policy more expensive and risk impacting the housing market if people are discouraged from downsizing.
The Institute for Fiscal Studies argued in 2023 that if there is an inheritance tax, “it should apply in the same way across all forms of wealth inherited.” When the Conservative government introduced a separate inheritance tax allowance for homes in 2015, it included a provision to stop the rule discouraging older people from downsizing.
A Conservative spokesperson said any behavioral shift would be limited in practice, and that the party’s pledge to scrap stamp duty would effectively increase housing supply.
Other promises made by the Tories at their conference include restoring benefits to families within the top 5% of earners, and halving the tax · businesses pay on employees in their early 20s. Badenoch also announced a £10 billion air defense program her party dubbed the “Britannia Shield.”
Badenoch still has work to do to win over the public. Polling shows voters now identify the Conservatives as the most trusted party on the economy, but also hold them responsible for the current economic situation and associate them more with high than low taxes.
The party of Margaret Thatcher and David Cameron is also seeking to restore a reputation for sound money in the wake of the so-called mini-budget that prompted Liz Truss’ resignation as prime minister after just seven weeks. While executives, investors and other attendees at the conference in Birmingham welcomed the commitment to cutting taxes, they’ve said they want to see more evidence the party will ease pressures on businesses and has the organization and ideas necessary to return to government.
The 46-year-old Tory leader likened her party’s fortunes to British retailer Marks & Spencer Plc, which she said had been criticized as “a bit stuffy and stuck in the past,” with some questioning its survival. Now, she said, “they have adapted their style for today’s market, and people are flooding back.”
Badenoch faces a fight on two fronts, with Prime Minister Andy Burnham at the helm of a resurgent Labour Party and Nigel Farage’s Reform UK continuing to draw many voters who helped power the Tories to their last election win in 2019. She’s helped by Burnham’s efforts to steer Labour leftward and a series of allegations about Reform’s financial contributions that have created an opening for the Tories.
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She delivered some of her sharpest attacks yet on Burnham and Farage, saying the prime minister’s only strategy is “hoping that the problems will just go away while Putin attacks our allies, while our economy flatlines,” adding: “Hope is not a strategy.” She criticized the premier’s policies on the economy, immigration and crime as well as his suggestion that the country should restart a debate on its ties with the European Union.
“Can you imagine having to go through that again?” Badenoch said. “So much time lost arguing with ourselves, arguing with the EU, going round and round in circles, businesses not knowing whether they should invest.”
Labour countered saying Badenoch’s plans would prioritize the wealthy over struggling families. Her party “would put Britain into reverse with the same Tory failures that crashed our economy and left public services crumbling,” Labour Party Chair Bridget Phillipson said in a statement.
In the speech that lasted more than an hour, Badenoch also ramped up her criticism of Reform UK, citing donation scandals and statements about race as reasons why her party will not “unite” with them.
“A year ago, those politicians were measuring up the curtains for No. 10,” Badenoch said. “Now, some of them are measuring up the curtains for their prison cells,” she added, referring to ongoing investigations into their financial affairs, including a £5 million gift to Farage.
Badenoch, who has led the party to a more hard-line position on immigration, attempted to separate that from the issue of race. Responding to remarks last week from Reform Member of Parliament Suella Braverman, a Tory defector, who said she considers herself British but not English since she’s of “Asian origin,” Badenoch made one of her most personal appeals yet on the issue.
“To those who say ‘unite the right’, we are not uniting with that,”said Badenoch, who was born in the UK and spent part of her childhood in Nigeria. “I don’t want to explain to my son when we’re watching our brilliant England team play football that some people don’t think our Black players are English.”