What happened
UK Conservative leader Kemi Badenoch has pledged to eliminate inheritance taxes on family estates if the Tories come to power. This move is seen as a highly regressive policy, as only the wealthiest 5 percent of estates in the UK currently pay inheritance tax. The average house price in the UK is less than £300,000, and it is only in central London postcodes and country estates that homes are worth significantly more than £1 million.
Badenoch's proposal would allow individuals to shelter up to £1 million under the current rules, and potentially more under her additional proposals for family wealth transfer. This has been criticized by Labour, who argue that the policy would benefit only the rich and leave working people to pick up the bill. The Labour-affiliated general secretary of the Trades Union Congress, Paul Nowak, remarked that this is the same old Tory playbook, cutting taxes for the rich and leaving others to pay.
Inheritance tax is currently scheduled to yield around £15 billion to the UK Exchequer by 2030, but Badenoch's proposal would vastly reduce this amount. The policy has also been criticized for undermining Badenoch's promise to cut borrowing and pay down the national debt. The move is seen as an attempt to shore up the core Conservative vote in the wealthier parts of England, but it may also perpetuate intergenerational inequality.
Other countries, such as the US, Canada, Australia, Sweden, and Norway, have either abolished or reformed their inheritance tax systems, citing the relatively little money raised and the discouragement of saving and investment. Badenoch may be hoping to lure back wealthy individuals who have left the UK due to inheritance tax risks, in order to recover lost income tax revenues.
