The Leader of the Opposition, Kemi Badenoch, has kickstarted a debate about the future of inheritance tax.
In a conference speech in Birmingham last week, she pledged to abolish it should the Tories win the next election. This policy announcement may be of interest to people inheritance tax planning in Cheshire or Oswestry at a time when total revenue from IHT is set to hit £9 billion this year, and £15 billion by 2030-31. It is estimated her proposals would knock around 50% off the current amount.
On the basis of the most recent figures, under 5% of estates were liable for IHT in the tax year 2023/24. Under the current regime, married couples are able to pass down property assets valued at £1 million or under to their beneficiaries tax-free. Under Badenoch’s proposals, a couple in this position would find themselves able to bequeath an entire estate of any value, free from tax. This policy would also see other assets worth an extra £1 million classed as exempt.
Should these measures be accompanied by the abolition of stamp duty, there would be questions about the likely impact on the UK property market, particularly if fewer family homes went on sale in areas of high demand. Property analysts such as Arun Advani, of the University of Warwick’s Centre for the Analysis of Taxation, have indicated that the main beneficiaries may be in those areas where housing is most expensive. The risk is that older homeowners may, in turn, be incentivised to hold on to a valuable property, out of fear that any proceeds of downsizing will be taxed by HMRC.
