Kemi Badenoch’s inheritance tax proposals are myth-based policy making at its worst

At the end of Downton Abbey (the Grand Finale), Lady Mary takes over the Downton estate from her far-from ancient parents, who retire to the dower house previously occupied by the Dowager Duchess. Maybe Kemi Badenoch was watching that movie (not recommended despite featuring the Institute for Government headquarters as a party venue) when she dreamt up her inheritance tax proposals, which were launched to mass acclaim at Conservative party conference. Because Lady Mary is the sort of demographic for whom this policy is designed. In Badenoch’s world, the parents could pass on that estate with no tax, and the family could go on enjoying their historic seat with no worry about IHT (or as it was probably called back then, estate duty).

Fast forward to the 21st century, and Badenoch’s proposal may delight a few aristocrats (and farmers) but looks designed to spend billions solving a problem that does not really exist, and damages a wide range of other policy objectives. 

Most people inheriting (relatively) expensive houses will already possess their own property 

Badenoch’s inheritance tax announcement delighted the watching party faithful, and she will hope that political momentum follows – as it did for the Conservatives when George Osborne’s 2007 promise to raise the IHT threshold spooked Gordon Brown to ditch plans for a snap election. She will be watching the post-conference polls closely, but the IHT section of her speech did not seem overly focused on the facts. It is hard to find much analysis on whether middle aged people are desperate to swap their homes for their parents when the latter die. But:

• The average house price in the UK is under £300,000. The IHT threshold, even after years of freezing, is £325,000. Couples can double up. If they pass their primary residence to their children (this is already a bad policy), they can pass on £1m worth of property tax free. Today, 90 per cent of properties attract no tax – yet most are sold on inheritance. ¹⁰ https://www.hamptons.co.uk/research/reports/market-insight-winter-2023/focus#/
• Average life expectancy is in the 80s. That means most “children” inheriting are heading towards retirement themselves, and most will have established their own households – and own their own houses. That is particularly likely if their parents already own an expensive house.

Her case depends on there being an enormous, untapped desire to move into the ancient parental home (which may be far away from where they live and work, and somewhere parents moved to on their own retirement).  Badenoch could argue that these choices are forced on people. But what paltry evidence exists suggest most people want to sell their inherited home as soon as possible – or refurbish it to allow a later sale or rental. ¹¹ https://internationalfinance.com/sector-insight/18-million-brits-set-inherit-property-plan/

There is a further reason why Badenoch is stuck in the past. Gone are the days of property being passed down to a single heir, Downton-style. In most cases, properties are inherited by all the children – who sell to split the proceeds. There is one arrangement where there may be an arguable case for the Badenoch proposal – where an adult child has lived with their parents as a carer, without their own home. But that hard case did not feature in the Badenoch rhetoric at all. 

The Badenoch proposal would exacerbate existing problems with the UK property market

Last year Kemi Badenoch’s conference rabbit was the abolition of stamp duty on house sales, a policy promise which would reduce friction in the housing market by allowing better labour and housing mobility – as people moved to where jobs were and could right-size their housing – and making it easier for old people to move from family homes into more manageable properties. It was an expensive policy – but one with a lot of potential upsides.
At a stroke, Badenoch 2026 is throwing away a lot of the gains from Badenoch 2025. Her IHT policy would give older people who wanted to avoid inheritance tax a massive incentive to overinvest in property as a tax shield ¹² The Conservative costing has been challenged by tax Policy Associates for assuming minimal behavioural response https://taxpolicy.org.uk/2026/10/08/conservatives-inheritance-tax-family-home-cost/ – to upsize or upvalue as far as they could so their heirs could benefit. It would put the top end of the housing market into a deep freeze. Moreover, it would divert spare cash away from investment that could help the British economy grow, into unproductive housing assets. 

If you think IHT is a drag on the economy, and you have the revenue to reform it, then raise the threshold, cut the rate or even abolish it – but do not privilege one class of asset at the expense of everything else.  Badenoch presented this as a growth policy. It is the reverse. It is good that the Conservatives are looking at tax reform – but would be even better if they focussed on some of the many real problems with the current system.