The Conservative leader, Kemi Badenoch, has signalled that homeowners could face lower inheritance tax bills under a future Conservative government, arguing that taxing wealth passed down to children is morally wrong. Her comments come as inheritance tax receipts reach record levels.
Record receipts and frozen thresholds
HMRC collected £8.5bn in inheritance tax in 2025–26, up from £8.3bn the previous year. Years of frozen thresholds have brought more estates within the scope of the tax. Property often accounts for a substantial proportion of an estate’s value, leaving homeowners particularly exposed.
The standard inheritance tax rate is 40% on the taxable portion of an estate. The main tax-free threshold remains £325,000, although additional allowances and exemptions can apply. For homeowners passing their main residence to children or grandchildren, the additional residence nil-rate band can increase the tax-free allowance. However, eligibility depends on the circumstances and value of the estate.
The government plans to keep inheritance tax thresholds frozen until 2031. As a result, more property-owning families could face a liability, even without substantial growth in their wealth.
Badenoch attacks ‘double taxation’
Speaking ahead of the Conservative Party conference in Birmingham, Badenoch indicated that she remains open to reducing or potentially abolishing inheritance tax. Asked by The Sunday Times whether she would scrap the levy, she said: “It is morally right that people don’t get taxed twice. It is morally right that if you work hard and want to give something to your children the Government doesn’t take it away.”
However, Badenoch stopped short of making a firm commitment, insisting that any tax cut must be affordable. “I am not going to announce tax cuts unless we can show how we pay for them… tax cuts are a good thing but you’ve got to be fiscally responsible,” she added.
The Conservatives have yet to announce whether they would raise the tax-free thresholds, reduce the 40% rate or abolish inheritance tax altogether.
What could reform mean for the property market?
Any reduction in inheritance tax could have implications for the housing market, particularly for older homeowners and families managing inherited property. Higher tax-free thresholds could allow more families to retain inherited homes without facing an inheritance tax bill. They could also reduce the pressure to sell property to meet a liability.
For estate agents, changes to the tax could influence the timing of probate sales and decisions about transferring property between generations. However, the effect on housing transactions would depend on the scale and structure of any reform. A modest increase in allowances would have different implications from abolishing the tax entirely.
For now, Badenoch has outlined no specific policy, timetable or funding plan. Her comments nevertheless bring inheritance tax back into the political spotlight at a time when frozen allowances and record receipts are increasing scrutiny of the levy.
