Badenoch Vows to Scrap Inheritance Tax on Family Homes and Raise Couples' Tax-Free Allowance to £1m

Conservative Party leader Kemi Badenoch has committed to eliminating inheritance tax on family homes and lifting the amount couples can pass on tax-free to £1m, using her keynote address at the party's Birmingham conference to draw sharp dividing lines with both Labour and Reform UK.

Speaking at Symphony Hall, Badenoch framed the pledge as part of a broader effort to reposition the Conservatives as the "no-nonsense party," contrasting her approach with what she characterised as the "circus" surrounding Nigel Farage's Reform UK and accusing Prime Minister Andy Burnham of wanting to "live in the past."

The inheritance tax announcement formed the centrepiece of a 66-minute speech that sought to convince voters the party has changed since its historic defeat at the 2024 general election. Badenoch said inheritance tax was "supposed to be a tax on the super wealthy" but has become "a tax on ordinary middle-class families in every corner of our country."

Under the proposal, the next Conservative government would legislate so that no one would ever pay inheritance tax on their family home. In addition, couples would be able to leave an additional £1m tax-free. According to the party's estimates, these measures would cut every inheritance tax bill and reduce the number of families paying the tax by more than half.

The current system applies a 40% tax rate to estates valued above £325,000, or £500,000 when a home is left to children or grandchildren. Married and civil partners can also transfer assets between each other. In the 2023-24 financial year, 4.72% of UK deaths resulted in an inheritance tax charge, raising approximately £7bn for the government.

Badenoch described abolishing inheritance tax altogether as her "ambition," but said she could not currently propose such a move because of spending commitments in areas including defence, prisons and the economy. The Conservatives have estimated the policy would cost around £6bn annually and believe they have identified £71bn in savings that could be made to government spending, including through welfare cuts.

Rival parties were quick to criticise the proposals. Labour Party chairwoman Bridget Phillipson said the announcement demonstrated that "the Tories haven't changed," accusing Badenoch of choosing "to do nothing to help ordinary families struggling with the cost of social care, prioritising the wealthiest instead."

Reform UK economy spokesman Robert Jenrick, a former Conservative MP, said Badenoch had "chickened out of doing anything big" and claimed she was "for the 2%." He contrasted the Conservative plan with Reform's own pledge to give everyone a £500 tax cut by raising the tax-free personal allowance to £15,000, saying: "The Tory Party is looking after its own in Kensington, Reform is looking after the country."

Badenoch arrived at the conference with a message to party members that they face a "battle for the soul of this nation." She argued the party is "renewed" and "coming back" as she continued her efforts to persuade voters that it has changed following the 2024 election result.

In a direct appeal to those who have defected to Farage's party, Badenoch said: "The Conservatives have had an export boom of drama queens going to Reform. This party is now the no drama party, we are the no-nonsense party." She described many Reform voters as "our people," adding: "We let them down and we want them to come back home."

Addressing the question of electoral cooperation with Reform, which drew one of the loudest responses of the afternoon from members in the room, Badenoch made clear she did not want to do a deal. She said: "To those who say 'unite the right', we are not uniting with that. People deserve better than that and we are going to give them better than that. Character, conduct, and standards matter." She also said she did not want to live in a country run by people who "debate whether my mixed-race children are English."

With the party trailing both Labour and Reform in the polls, Badenoch acknowledged that voters are "looking through the shop window," that they "like what they see," but that "not enough of them are buying yet, we need to fix that." She drew inspiration from Marks and Spencer, arguing the retailer had "adapted their style for today's market and people are flooding back." She added: "Just like M&S, we must learn from our mistakes, win back trust and make people feel good about our party again."

The speech also referenced other policies the party has announced in recent days, including a £10bn anti-missile defence system, 50,000 new prison places, and halving the rate of employer national insurance on earnings for people aged between 21 and 24. The party has further pledged to scrap the "cliff edge" that causes parents in England to lose childcare support.

In one of several jibes aimed at Burnham, Badenoch labelled the Prime Minister a "Paddington Bear prime minister" who was "hoping that the problems will just go away."

The conference speech represents a pivotal moment for Badenoch as she seeks to define her leadership and restore the Conservatives' electoral fortunes. By pairing a tangible tax pledge with a broader cultural argument about character and competence, she is attempting to consolidate support among traditional Conservative voters while presenting her party as a serious alternative to both the governing Labour Party and the insurgent Reform UK.

The inheritance tax proposals, however, are likely to reignite debate about fiscal priorities and fairness. Critics argue that cutting inheritance tax benefits wealthier estates, while the party insists the changes would ease the burden on middle-class families. How voters respond to that argument, and whether Badenoch's "no-nonsense" framing resonates beyond the conference hall, will be tested in the months ahead.