No IHT on family homes? Don't rewrite your estate plan just yet

With speculation about future tax policy back in the headlines, it looks like inheritance tax (IHT) is back on the menu.

In her Conservative Party Conference speech, leader of the opposition Kemi Badenoch announced plans to remove IHT from family homes and let couples pass on an extra £1 million tax-free. She also set out a longer-term ambition to scrap IHT altogether.

These proposals have already sparked plenty of debate. But if you’re a business owner or part of a high-net-worth family, you should be wary of making long-term decisions based on opposition policy announcements.

IHT is a major part of the UK tax landscape today, and with growing talk of wealth taxes, capital taxes, and further fiscal reform, estate planning definitely deserves a place on your post-Budget checklist.

Inheritance tax: still a growing issue

IHT was originally designed to apply to the wealthiest estates. However, years of frozen allowances and rising property values have steadily pulled more families into scope including ones who do not consider themselves wealthy.

• The nil-rate band (the amount you can pass on before IHT applies) has been stuck at £325,000 since 2009.  
• The residence nil-rate band (an extra allowance when your home passes to your children or grandchildren) has been frozen at up to £175,000.

This means for many business owners and people with significant property holdings, IHT is getting harder to ignore.

The rate is still 40% on the part of an estate above the available allowances. If your family holds substantial assets outside pensions and exempt structures, that can mean a chunky tax bill on death.

What did Badenoch propose?

In her conference speech, Kemi Badenoch pledged that a future Conservative government would:

• Remove inheritance tax on family homes passed to children or grandchildren.
• Let couples pass on an extra £1 million tax-free.
• Cut the number of estates paying IHT by more than half.
• Abolish inheritance tax entirely, once the public finances allow.

These proposals clearly target homeowners and wealth creators who feel decades of asset growth have dragged ordinary family estates into what was once a tax on the very wealthy.

Why planning matters now

What really matters is that tax policy is fast becoming a political battleground. One party is talking about cutting IHT, while others keep looking for ways to raise more from wealth and capital.  

In recent years, pensions, business reliefs, agricultural reliefs and capital gains tax have all come under review when governments needed money.

This means, if you own a business, assuming long-standing reliefs will always be there can be an expensive misstep.

A sensible approach for business owners and HNWIs

Rather than trying to predict who’ll form the next government, it makes more sense to review your position based on today’s rules and tomorrow’s potential risks.

Key areas to consider include:

• Whether Business Relief is available on your trading company shares.
• Succession planning for your family business.
• Lifetime gifting strategies.
• Trust arrangements, where appropriate.
• Your pension wealth, and how it fits into your wider estate.
• IHT bills on company shares and potential double tax to settle the liability.
• How property and investment growth could affect the future value of your estate.

For many families, a little planning done years in advance can achieve far better results than a rushed review after a major tax announcement.

The bottom line for IHT in 2026

Political promises on inheritance tax will keep grabbing attention, and Kemi Badenoch’s pledge to remove IHT from family homes is likely to resonate with many business owners and wealth creators.  

But today’s tax rules haven’t changed, and the long-term direction of UK wealth taxation remains uncertain. Future governments might cut IHT, reform it or introduce new wealth-based taxes. Whichever way it goes, one thing is clear: estate planning is no longer something to leave until later.

If you’re a business owner or high-net-worth individual, reviewing your IHT position after the Budget could be one of the most valuable conversations you have this year.

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