The Conservatives’ Inheritance Tax Proposal: What Could It Mean for You?
By Georgia Holmes
Discover what the Conservatives' proposed changes to Inheritance Tax could mean for homeowners, families and your estate planning, including the potential benefits, drawbacks and impact on your wealth.
Inheritance Tax (IHT) has become an increasingly important issue for UK families, particularly homeowners who have seen property values rise over the years. Now, the Conservatives have announced plans to abolish Inheritance Tax on the family home and increase the tax-free threshold for other assets if they win the next general election..
Announced by Conservative leader Kemi Badenoch on 7 October 2026, the proposal aims to help families pass more of their wealth to the next generation. However, while it could reduce IHT bills for some households, it has also raised questions about fairness, government finances and the potential impact on the housing market.
So, what are the proposed changes, who could benefit, and what might the positives and negatives mean for your financial planning?
What Are the Conservatives Proposing for Inheritance Tax?
Under the current rules, Inheritance Tax is generally charged at 40% on the taxable value of an estate above the available tax-free allowances.
The standard nil-rate band is £325,000 per person. An additional residence nil-rate band of up to £175,000 may apply when a qualifying home is passed to direct descendants. Unused allowances can generally be transferred between spouses or civil partners, meaning an eligible couple may be able to pass on up to £1 million without IHT under the current rules.
The Conservatives have proposed two main changes if they win the next general election:
Abolish Inheritance Tax on the family home: The main home would be exempt from IHT when passed to children or grandchildren.
Increase the individual threshold to £500,000: This would replace the existing £325,000 nil-rate band and £175,000 residence nil-rate band with a simpler allowance for other assets.
Under the proposal, a couple could pass their main home to direct descendants and leave a further £1 million in other assets without an IHT liability, subject to the final rules.
The Conservatives have said the changes would be an initial step towards their longer-term ambition of abolishing IHT altogether. However, the plans are proposals rather than changes to the current tax system.
Why Do the Conservatives Want to Change Inheritance Tax?
The Conservatives argue that families should be able to pass on wealth they have built up through years of working, saving and owning a home.
Rising property values mean some households may now have estates worth more than the available IHT allowances, even if much of their wealth is tied up in their home rather than readily accessible cash or investments.
The party has also argued that IHT can feel like a second tax on wealth accumulated from income that may already have been taxed. It says the proposed changes would make it easier for families to pass assets to their children and grandchildren.
However, fewer than 5% of estates currently pay IHT. Critics argue that a substantial reduction would therefore benefit a relatively small proportion of households, with the largest gains potentially going to people with the most valuable properties and highest levels of wealth.