Kemi Badenoch has pledged that a future Conservative government would abolish inheritance tax on family homes left to direct descendants and increase the standard tax-free allowance to £500,000 per person.
The policy, announced on 7 October, would replace the existing combination of a £325,000 individual allowance and a separate £175,000 residence allowance with a larger general allowance and an exemption for the main home.
The Conservatives say a couple would be able to pass their main home to direct descendants free of inheritance tax, alongside a further £1 million that could be left to anyone.
Family home exemption
The proposed exemption concerns a main home passed to children or grandchildren. It is not an announcement that all property or all inherited assets would be exempt.
The party says it wants eventually to abolish inheritance tax altogether, describing these changes as an initial step.
Shadow Chancellor Andrew Griffith said the pledge would be supported by plans to control public spending, particularly welfare expenditure.
How the current system works
Under current rules, the standard inheritance-tax rate is 40% on the taxable portion of an estate above the applicable allowances and exemptions.
The ordinary nil-rate band is £325,000 per person. An additional residence nil-rate band of up to £175,000 can apply when a qualifying home is left to direct descendants.
Unused allowances can be transferred to a surviving spouse or civil partner. Qualifying couples can therefore already pass on up to £1 million without inheritance tax under the present system, subject to the rules.
The residence allowance is reduced for estates worth more than £2 million, falling by £1 for every £2 above that level.
The proposed Conservative £1 million allowance for couples would sit alongside the main-home exemption, rather than include the home within the same total.
Cost and distribution questioned
AJ Bell cited an Oxford Economics estimate that combining a main-residence exemption with a £500,000 individual nil-rate band could reduce tax receipts by around £6.6 billion in 2029–30 and approximately halve the number of estates paying the tax.
Those are estimates of the proposal’s potential effects, rather than established outcomes.
The Institute for Fiscal Studies said the largest benefits would go to people with the highest wealth and most valuable homes, particularly in London and south-east England.
It also warned that exempting homes while continuing to tax other assets could encourage wealthy people to hold more of their wealth in expensive property, affecting the housing market.
A pledge requiring legislation
The announcement does not change current inheritance-tax law. It is a Conservative policy commitment that would require a future government to legislate, with detailed eligibility and implementation rules still to be settled.
Sources
- Conservative Party: Official policy announcement — 7 October 2026
- GOV.UK: Current inheritance-tax rules
- GOV.UK: Nil-rate bands, transferable allowances and residence taper
- Institute for Fiscal Studies: Response to the Conservative announcement — 7 October 2026
- AJ Bell: Analysis citing Oxford Economics estimates — 7 October 2026