Kemi Badenoch’s inheritance tax plan is bold and welcome

The Tory leader is right, says ​David J Alexander. Taxing people after they die on assets which have already been taxed is unjust.

The announcement by Kemi Badenoch that she would remove the family home from any future inheritance tax (IHT) liability was, despite being well trailed, still very surprising. Tackling the most hated tax in the UK is a bold move and one that will be welcomed by many concerned homeowners across the country.

While people often assume that IHT is a tax that targets the very wealthy the reality is that they generally don’t pay it. They have advisers and accountants who put in place measures to ensure that the very wealthiest avoid IHT. It is perfectly legal but expensive to put in place.

This means that IHT mostly hits the middle classes. The majority of most people’s assets lie in the home they own and it is this group – whose pensions are also now being targeted – that end up paying the most in IHT.

Again, there have been some dissenting voices who say that this only effects one in 20 estates. Whilst that is true at the moment that figure is set to double. The Office for Budget Responsibility (OBR) is forecasting IHT revenue of £9.1bn for the 2025/26 year but believes that by 2030/31 the amount collected will have risen to £14.5bn and will affect 10 per cent of all estates.

So, this is a proposal that will be welcomed by many as inheritance tax is widely perceived as a tax on ambition, on aspiration, and on hard work. It will also be welcomed by the general public who, in successive polls, have deemed this to be the most unpopular tax in the country because it is viewed as a tax on already taxed income.

Everybody would like to leave something for their loved ones when they die but increasingly the government wants a larger part of estates. It is not just the financial implications – although everyone with family will want to help the next generation as much as possible – but also a kind of moral right. Why should you be punished for having done the right thing?

This is a tax on pensioners who have seen the value of their modest homes increase in value; it is a tax on families who have sought to do the right thing by working hard, saving, and accumulating assets in the hope of leaving something to their children; and it is a tax on the entrepreneurs and business owners who create wealth in society and are now to be punished for this at the end of their working lives.

This proposal by Kemi Badenoch is an attempt to rewrite the injustice of taxing people after they die on assets which have already been taxed.

It is a reversal of the current policy which is to target thrift, effort, saving, and work through taxation. Instead, this change seeks to ensure that assets accumulated over a lifetime can be passed on and provide a nest egg for families.

It is a broadly welcome proposal which sends a positive signal that people should have the right to acquire assets and that their homes are the most important asset of all. It is not something that the state has a right to tax again once someone has died.