Amid renewed speculation – first reported by Guido – that Tory Shadow Chancellor Andrew Griffith might pledge to abolish Inheritance Tax at conference in a few weeks, Guido has compiled some essential facts about the tax. And its abolition…
IHT is charged at 40% on estates above a £325,000 nil-rate band, frozen since 2009 and now frozen to April 2031, with an additional £175,000 residence nil-rate band where a home passes to direct descendants and both bands transferable between spouses, giving a couple up to £1 million tax free. The UK’s IHT is one of the harshest:
18 out of 38 OECD countries do not levy any inheritance tax on direct descendants.
The UK has the fifth highest inheritance tax in the OECD.
The effective UK IHT rate is three times the global average and two times the EU average.
The US levies IHT but it only cuts in if your estate is worth over $12.92 million. A married couple doesn’t pay the death tax unless their assets exceed $26 million…
The inheritance tax threshold has been stuck at £325,000 for 17 years since April 2009.
Inheritance reduces inequality. OECD 2021 report pointed out: “While lower-wealth households receive smaller inheritances and gifts, these are typically large as a share of net wealth.”
Administering IHT directly costs the taxpayer approximately £66 million per year.
For those countries which still levy IHT, the rate is often modest. 4% in Italy if the estate goes to children, 15% in Denmark, 10% in Iceland…
By 2027 average priced properties in 77% of local authority areas will be liable to inheritance tax.
Sweden’s left-wing govt scrapped the inheritance tax in 2004, boosting economic growth. Capital flowed in with Ikea founder Ingvar Kampland moving back to Sweden and Finnish financier Björn Wahlroos moved in…
Removing the tax on bequests leaves more wealth intact to be saved and invested, lifting the economy’s total capital stock by 0.78%.
In 2022/23, IHT raised 0.89% of total tax revenues.
Austria, Portugal, Sweden and Norway have all abolished inheritance taxes in the last 20 years.
At least 83 countries do not levy inheritance tax at all, including Norway, Sweden, Canada, Australia, New Zealand, Mexico, Austria, Cyprus, Slovakia, Israel, China, India and Singapore. A further 20 or so exempt assets passed to direct descendants, so a majority of countries either do not levy IHT or do not levy it on assets passed to children.
The claim that only 4% of estates are liable is out of date. HMRC figures released in 2023 showed that within 10 years 1 in 8 people (12%) will have IHT due on either their own or their spouse’s death, rising to 23% in London. That was before Labour brought pension pots, business and agricultural assets and AIM stocks into scope.
Inheritance is a critical source of business funding. Research by Charles Stanley found 20% of new businesses rely on inherited money, only 1% less than bank funding, and 19% of start-ups are financed by parents. Only 8% are funded by venture capital. 15% of business owners use inheritance for further growth investment.
The obvious consequence of the policy is that profits are hoarded to pay the tax bill rather than ploughed into investment. CBI Economics found 55% of BPR-affected and 49% of APR-affected businesses have paused or cancelled planned investments, an average fall of 16%. More than 60% expect to cut investment by more than 20%.
Around half of family businesses and farms foresee lower headcount or have paused recruitment, with an average headcount cut of 9% per firm and a similar 9% fall in turnover.
CBI Economics estimate reduced activity will cost £14.8 billion in GVA over the five years to 2030, of which £6.5 billion is family businesses and the rest supply chain. They put the result for the Exchequer at a net fiscal loss of £1.9 billion over the period, likely an underestimate.
Reform has attacked the potential Tory proposal – Robert Jenrick called it a “desperate play.” Reform pledged to abolish the tax altogether in 2025, too…
UPDATE: Kemi Badenoch confirms she is looking at stripping down or scrapping Inheritance Tax.
“Reform says abolishing inheritance tax is ‘morally wrong’. I think it is morally wrong to punish people for doing the right thing – spending a lifetime working, saving, building up a business or a home to pass on to the next generation.
That’s why I’ve asked my team to explore fiscally responsible ways to do address this burden. The people caught by inheritance tax are mostly home-owning middle-class families due to house price inflation, diligent savers, and small-business owners.”
Kemi Badenoch has given a speech in central London on the Tories’ plan to raise defence spending to 3% of GDP by 2029/30, worth £10 billion a year extra against Labour’s Defence Investment Plan. The savings:
£4 billion from Housing Benefit, via lower LHA rates and cuts to social sector rents. Detail promised at conference…
£3.1 billion from reimposing the two-child benefit cap.
£1 billion from ending VAT exemptions on Motability leases and resale, keeping the exemption for wheelchair and stretcher-adapted vehicles.
£1 billion from stopping the annual uplift to the British Business Bank’s Industrial Strategy capital.
£2.75 billion moved from the National Wealth Fund to the National Defence and Resilience Bank.
£2 billion of civil R&D moved into defence.
£0.2 billion a year from scrapping the Chagos deal.
Some of the savings were announced earlier. The Tories are trying to steal Reform’s thunder on the first day of their conference…
Andrew Griffith was promoted from Shadow Business Secretary to Shadow Chancellor this week. He became Tory MP for Arundel and South Downs in 2019, having previously worked as a senior executive in the media industry. He was Sky’s CFO from 2008 – the youngest FTSE 100 finance director at the time – and later COO…
In government he did a stint as junior exports minister in 2022 and had other roles including minister for science, research and innovation, economic secretary to the Treasury, and director of the Number 10 Policy Unit. He also served as Boris Johnson’s chief business adviser prior to becoming an MP. Reform has attacked various bog-standard releases from Griffith from his ministerial days celebrating Net Zero…
Guido has done some digging on Griffith’s policy views. He:
Suggested recently that Britain should follow Sweden and abolish Stamp Duty as well as Inheritance Tax.
Attacked the Making Tax Digital scheme which forces taxpayers to file taxes five times per year.
Opposes nationalisation of British Steel: called nationalisation “a bad idea” and voted against the Steel Industry (Nationalisation) Bill.
Attacked Labour’s “Trump-style” steel tariffs (doubling tariffs, halving quotas) as tilting the playing field toward one firm at the expense of automotive, aerospace, advanced manufacturing and defence supply chains.
Called to mostly scrap destructive IR35 tax changes that unfairly penalise the self-employed and contractors.
Attacked business rates: “From a business perspective, they are a terrible tax; they are paid before a business has made a single pound, and they get fewer and fewer services from local government in return.”
As a minister, voted against imported goods having to meet domestic standards, and against higher taxes on banks.
Ran a “Save the Summer Job“ campaign proposes scraping several EU-inherited regulations primarily originating from the EU Working Time Directive. And other relaxations…
Committed to mostly repeal the Employment Rights Act’s “job-killing measures,”
The abolition of Inheritance Tax is seen as a likely Conference policy rabbit. Griffith has railed against it for years…
The reshuffle is ongoing. Follow it live here:
Shadow Chancellor of the Duchy of Lancaster and Shadow Secretary of State for Northern Ireland: Alex Burghart
Shadow Chancellor of the Exchequer: Andrew Griffith
Shadow Secretary of State for Business, Innovation, Science and Trade: Claire Coutinho
Cover while on maternity leave: Julia Lopez
Shadow Chief Secretary to the Treasury: Richard Fuller
Shadow Secretary of State for Foreign, Commonwealth and Development Affairs: Tom Tugendhat
Shadow Secretary of State for the Home Department: Chris Philp
Shadow Secretary of State for Defence: James Cartlidge
Shadow Minister for Policy Renewal: Neil O’Brien
Chairman of the Conservative Party: Kevin Hollinrake
Shadow Secretary of State for Work and Pensions: Helen Whately
Shadow Secretary of State for Energy Security: Andrew Bowie
Shadow Secretary of State for Education: Laura Trott
Shadow Secretary of State for Justice: Nick Timothy
Shadow Secretary of State for Health and Social Care: Damian Hinds
Shadow Secretary of State for Environment, Food and Rural Affairs: Victoria Atkins
Shadow Secretary of State for Transport: Richard Holden
Shadow Secretary of State for Housing, Communities and Local Government: Katie Lam
Shadow Secretary of State for Culture, Media and Sport: Rebecca Paul
Shadow Secretary of State for Scotland: Harriet Cross
Shadow Secretary of State for Wales: Mims Davies
Shadow Secretary of State for Women & Equalities: Joy Morrissey
Shadow Leader of the House of Commons: Jesse Norman
Shadow Leader of the House of Lords: Lord True
Opposition Chief Whip: Rebecca Harris
PPS to the Leader: John Glen
Chris Philp keeps Shadow Home Secretary.
Rebecca Paul replaces Nigel Huddleston as Shadow Culture Secretary.
Harriet Cross replaces Andrew Bowie as Shadow Scotland Secretary.
Katie Lam replaces James Cleverly as Shadow Housing Secretary.
Joy Morrissey appointed Shadow Minister for Women and Equalities.
Andrew Griffith replaces Mel Stride as Shadow Chancellor.
Richard Fuller remains Shadow Chief Secretary to the Treasury.
Claire Coutinho moves to Shadow Business Secretary.
Stuart Andrew out as Shadow Health Secretary.
Priti Patel out as Shadow Foreign Secretary. To be replaced by Tom Tugendhat…
The Tories have an eye on their swing voters. Will Badenoch’s top team pivot to the centre…
The Tories are giving it both barrels to John Healey over his decision to shift the goalposts on the government’s defence spending target. Shadow Defence Secretary James Cartlidge said today:
“With Russia ramping up its threats every day, the world has only got more dangerous since John Healey resigned two months ago, saying Labour’s current plan for 2.7 per cent on Defence would leave Britain ‘less safe’.
He urged Starmer to go to 3 per cent by 2030. Given he is now the Chancellor, it is extraordinary that he is backtracking on the very pledge which sealed the fate of the last PM and opened the door of Number 10 to Andy Burnham.
For over a year we have urged the government to go to 3 per cent by 2030, and Kemi repeatedly offered to work with Starmer to deliver it. He refused and paid the price – Burnham needs to do what Starmer could not and make the difficult decisions to fund 3 per cent.
Russia doesn’t work to Treasury timetables, and we can’t wait for a spending review to keep Britain safe.”
Robert Jenrick also laid into Healey’s claims that Burnham’s premiership is “continuity” Labour. Silly season is almost over. Healey is about to discover being Chancellor entails more than just ranking pub grub on TikTok…
Guido has seen a copy of the Tories’ local election guidance for this year. Titled: “Winning your local election in a multiparty world: Persuasion, persuasion, persuasion”…
Written in February, the document sets out the Tories philosophy on voter communications in the new political era. It reads:
“The main focus of campaigning is no longer just about identifying strong supporters and getting them to the polls.
It’s about identifying soft voters – and persuading them, persuading them, and persuading them again. The parties that adapt to this new environment will win. The parties that rely on old assumptions will lose.”
CCHQ describes its crucial ‘swing voter audience’ as follows:
“This audience is canvassed at 42% Conservative, with large numbers of Ms and Ts. In other words, this is an audience highly open to persuasion.
They are relatively well-off and highly likely to vote. They are slightly more likely to have voted Remain in the referendum, but they are also likely to have voted Conservative in the past. Many in this group started to leave us in 2015, favouring Green, Liberal Democrats, Labour and Plaid.
They are only likely to vote for us now if we start having persuasive conversations with them about the local Conservative team, about plans for the local economy, and about the good work we’ve done so far. As a group, they require a higher level of engagement and proof that their local Conservative team are delivering locally.”
Ms are LibDem/Tory waverers and Ts are Labour/Tory waverers. Badenoch has a reshuffle coming up as part of which her target voters will be at the top of CCHQ minds…
Co-conspirators should watch for which mid-ranking Tory backbenchers get promotions in the Badenoch reshuffle. Jack Rankin and Katie Lam are two on the right of the party who could be up for promotion – Aphra Brandreth and Harriet Cross less so. There is some talk of the Tories picking up a strategy of the ‘anti-Reform tactical vote’ in order to consolidate mostly in the South…
There is internal debate over whether to continue chasing Reform votes in the main. Are the constituent parties of the right about to pick up their own audiences instead of shredding each others’?
