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Conservatives unveil sweeping inheritance tax overhaul as questions mount over cost

Date: 07 October 2026

2 minute read

7 October 2026

If you are covering Kemi Badenoch's new inheritance policies revealed at the Conservative conference, please see the following comment from Shaun Moore, tax and financial planning expert at Quilter:
 

"For many families, inheritance tax is no longer a tax for those in mansions or aristocrats. Years of rising house prices and frozen thresholds mean it is increasingly catching families who happen to own a valuable home and have built up pension and investment wealth over a lifetime.

"The announcement is particularly significant given the changes due from April 2027, when unused defined contribution pension funds are expected to be brought into scope for inheritance tax. For many households, the inclusion of pension wealth may tip them over the various allowances and become liable to the tax.

"Take a married couple with a £700,000 family home, £500,000 in pensions and £500,000 in ISA and investment assets. If both were to die after April 2027, their combined estate would be worth £1.7 million. Under the inheritance tax regime, they could benefit from the combined £1 million nil-rate band and residence nil-rate band, leaving £700,000 subject to inheritance tax and generating a bill of around £280,000.

 
"Under the Conservative proposal, the family home would be exempt from inheritance tax and the remaining £1 million of pension and investment wealth would sit within the proposed £1 million allowance. In that scenario, the inheritance tax bill could fall from £280,000 to zero."
 
"That said, there is no escaping the fact that this would be a very expensive tax cut. Inheritance tax receipts have ballooned in recent years as rising asset values and frozen thresholds have pulled more estates into the net. They are also expected to increase further once pensions become liable from April 2027.
 
“There is a degree of déjà vu here. George Osborne's ambition of allowing couples to pass on £1 million free of inheritance tax was ultimately delivered through the residence nil-rate band rather than a straightforward increase in the standard nil-rate band, largely because of the cost involved. The £325,000 nil-rate band has meanwhile been frozen since 2009 and would now be worth well over £500,000 had it risen with inflation. While a higher threshold would be popular with many families, the same question remains today, how would such a substantial tax cut be paid for?
 
"The Conservatives are tapping into a genuine frustration among voters who feel inheritance tax has expanded far beyond its original reach. However, if implemented in full, these proposals would likely reduce inheritance tax receipts considerably at a time when the Treasury is becoming ever more reliant on them.
 
"The biggest winners would be families with substantial housing and pension wealth. But ultimately, this would have to be funded from elsewhere. The question is what would have to give if the Conservatives returned to government and sought to implement the policy.

Alex Berry

External Communications Manager
+44 (0)7741 151931

Notes to Editors

Notes to Editors:

About Quilter plc

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