Key events
As Andrew McDonald and Megan McElroy point out in their London Playbook briefing, there are broadly two options if Kemi Badenoch wants to cut inheritance tax without getting rid of it completely. They report:
There were persistent rumors and some reporting before this conference that the Tories were looking to scrap that tax altogether. But since then, Badenoch’s team has been making more cautious noises. Right-leaning papers including the Telegraph, Times and Sun all report this morning that Badenoch will cut IHT, but not scrap it. That would sit well with the broad theme of the speech on the state of the public finances, given inheritance tax is expected to raise more than £10 billion a year from next year onwards. To put it another way: scrapping IHT would effectively cost the same as building a “Britannia Shield” every year.
Instead: The Times’ Oliver Wright and co. reckon Badenoch will announce a cut to the 40% inheritance tax rate, which only applies to an estate’s value over £325,000 (or £500,000 if a home is given to a direct descendant). If that is what Badenoch opts for … it’s still an expensive tax cut. Estimates from 2023, the last time the Tories were looking at this, reckoned a 10 percentage point cut to 30% would cost a few billion a year. The other rumor doing the rounds is that she could change the thresholds at which IHT kicks in.
How many people pay inheritance tax?
Inheritance tax (IHT) s one of the most curious taxes in the Treasury’s armoury. It is one of the most unpopular of all taxes levied by HM Revenue and Customs, with polling showing strong support for getting rid of it entirely, even though most people never pay it. The explanation for this paradox is partly the visceral belief, widely shared, that parents should be able to pass on their assets to their children. (Another factor is that inheritance tax is also very unpopular with the sort of rich people who own newspapers, even though Kemi Badenoch claims they never have to pay.)
Speaking about IHT on the Today prograamme this morning, Helen Miller, director of the Institute for Fiscal Studies thinktank, said:
It’s a tax that is charged on estates when people die, but only around one in 20 estates will actually end up paying it.
The threshold for inheritance tax is £325,000, which means it is not charged on any estates worth less than that. If a home is being given away to children, the threshold rises to £500,000, and for couples the threshold rises to £1m. “So most people don’t go anywhere near the tax,” Miller said.
There are more details of how the tax works here. And here is a Commons library briefing on IHT including this chart showing how many people pay it.
Badenoch expected to propose inheritance tax cut in speech to Tories saying UK faces ‘battle of ideas’ over spending
Good morning. Kemi Badenoch is expected to announce cuts to inheritance tax (IHT) this morning in a keynote conference speech that will claim the next election will be a “battle of ideas” between a government spending ever more money, and a Conservative party determined to make the state live within its means.
The Tories have not confirmed that inheritance tax cuts will be proposed. Equally, they have done nothing at all to quash speculation that Badenoch will make an announcement along these lines, to the point where it is now hard to see how she can deliver a speech that does not mention IHT without causing huge disappointment to her supporters. IHT is set to raise £15bn a year for the Treasury by the end of the decade, and Badenoch is expected to propose cutting it rather than getting rid of it completely.
While any tax announcement is likely to dominate the headline, the Tories are also set to publish a “savings plan” today that will explain where they will find the money for tax cuts, including for the £2.3bn cut to employer national insurance for young people announced by the party last night. At their conference last year, the Conservatives said they had identified cuts to government spending worth £47bn, with £23bn coming from welfare. Yesterday Helen Whately, the shadow work and pensions secretary, said she had found “billions more” in cuts, in addition to those on the table last year.
The Conservatives have released some extracts from Badenoch’s speech in advance, and she will focus on an assertion that there is now a firm dividing line between Labour and the Tories on public spending. She will say:
There is a fight coming in British politics.
A fight that we have not seen in this country for more than half a century.
It will be a battle for the soul of this nation.
A battle of ideas.
A battle that goes to the very core of who we are and what kind of country we want to be.
On one side we have a government that wants to wind back the clock to failed ideas of the past.
They believe economic growth is created by politicians.
They think government knows best.
They think that your income, your pension and your savings are theirs to take and then hand out as they see fit.
They claim that what they are doing is compassionate but we know that these ideas will make every single person in this country poorer.
Your taxes will be higher. Your bills will go up. You will find it harder and harder to make ends meet.
Just because these ideas are delivered on TikTok doesn’t make them any less dangerous than they have always been.
On the other side of the battle is us.
A renewed Conservative party fighting again for the belief that what people earn belongs to them, not government.
That the collective wisdom of people in our country is greater than the central planning of bureaucrats and politicians.
That spending money we don’t have on things we can’t afford is not kind, it is reckless.
Here is the agenda for the day.
10am: Kevin Hollinrake, the Tory chair, opens the session. There are also speeches from Chris Philp, the shadow home secretary, and Nick Timothy, the shadow justice secretary.
Around 11.15am: Kemi Badenoch delivers her keynote speech.
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