Inheritance Tax

Rebecca Smith Excerpts

Wednesday 14th October 2026 Commons Chamber

[Catherine West (Hornsey and Friern Barnet) (Lab)]

It is a real pleasure to speak in this debate and to reflect on the question of inheritance tax brought to the House by the Conservative party. It affects about 4% of the population. On the Government Benches, we are rather more concerned with the 63% of the population who are facing tough times. Labour will therefore be voting against this Opposition day motion.

I think we all remember where we were in the summer of 2022 when Liz Truss crashed the economy. The mortgages that ordinary families around the country were paying went through the roof. A shiver went down the spines of all the people who had pensions invested, as civil servants were sacked and the general reputation of the economy in the UK was trashed. Sadly, we have been paying the Truss penalty ever since. However, those of us on this side of the House fought to stop the chaos, restore hope and deliver change. In two years a lot of progress has been made, and even more has been made over the summer. I look forward to the Budget that will be presented in two weeks’ time, which will have more to offer those who are struggling with the cost of living crisis.

Today, His Majesty’s official Opposition are asking the House to vote to bring back that version of chaos. Independent analysis suggests that the Conservatives’ inheritance tax proposals could cost up to £10 billion a year. Most families would rather see that money used to tackle the cost of living for everyone and to increase the wealth of the country as a whole, rather than being used to provide tax cuts for the 4% proportion of the population affected by this particular tax. The Conservatives say that theirs is the party of home ownership, but after their 14 years in government, home ownership fell out of reach for too many young people. The only growth was the growth in homelessness, which, sadly, increased by 74% during those 14 years.

Working people look to the Government to tackle the cost of living crisis and give them some breathing space, but unfortunately the Conservatives’ priority is cutting tax on inherited wealth. As my hon. Friend the Member for Welwyn Hatfield (Andrew Lewin) pointed out so eloquently, we should be looking at all possible options to establish the meritocratic principle that no matter where you are born or what your background is, you should have an opportunity throughout your working life to make the very best of it and to be successful.

[Rebecca Smith (South West Devon) (Con)]

I wonder whether the hon. Lady might like to comment on the fact that from next April pensions will be included in what is being described as “inherited wealth”. Does she agree that pensions are not inherited wealth, but money that has been earned and set aside by those doing the right thing? Now there will be a cost to ordinary families when they hand that money down.

[Catherine West]

As the hon. Lady knows, a commitment has been made not to tax those who only receive the state pension. Those who earn a lot, whether through pensions, inheritance or other things, will be taxed proportionately, which sounds like a pretty fair principle to me.

In the meantime, we on this side of the House are getting on with building a fairer country with a new political and economic model, but we also need to help people right now. That is why Labour has taken immediate action to provide breathing space for people and businesses. A couple of Members have mentioned the IMF report. As so often with the work of economists, it is a bit of a curate’s egg. Some people may prefer the text that was on the opposite side, but the bit that I preferred came from the economist Ms Tenreyro: the world economic outlook report gave the UK’s GDP an upgrade. That, I think, gives us some hope. It sets a fairly positive background for the Budget that is just two weeks away. We on this side of the House have woken up to a little bit of positive news, which is also quite a good background for the decisions that will come in two weeks’ time.

I know that many other Members wish to speak, so I will be brief. I am particularly pleased about the scrapping of VAT on electricity bills for the winter, and I know that there is more to come for households that use a lot of electricity, perhaps owing to disability or because a large number of people live in the same home. The capping of bus fares at £2 for the whole of 2027 will help people travel to work or to job interviews. The change in the rules on branded items of school uniform will ease costs for families. Business rates for pubs, social clubs and music venues have been reduced by 20%, and in London all children will have a hot dinner in the middle of the day at school. The public procurement rules have been changed to back British businesses and jobs. So many things have been introduced in the short two years for which Labour has been in office, and there is much more to come.

These measures build on work that Labour has done to restore stability and growth to the economy. Difficult decisions have been taken, and I was pleased to note that the Prime Minister had announced a further difficult decision on the triple lock. This, I think, is a moment when we have to be a little bit gutsy in our politics. I was pleased that the Prime Minister announced that very difficult decision; it is coming down the track, but he did at least announce it, so that we can start talking about the difficult challenges that we face in respect of social care.

There is a ring of chaos to the proposals flung out by the Conservatives. I know about this, because I was in opposition for 14 years. I know how tempting it is to have a giggle in Opposition day debates, but we have to face the truth. We have to make some difficult decisions in order to restore the reputation of our economy with the markets internationally, but also to build the important foundation with some innovation that has been raised by my hon. Friend the Member for Welwyn Hatfield and others who I am sure will speak in this debate.

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[Noah Law]

That is quite right. This is not pragmatic at all; this is complete ideology and returning to— [Interruption.] It is. It is pure ideology. The Conservatives are returning to their core comfort zone of defending only the very wealthiest at the expense of all the rest of us.

[Rebecca Smith]

I thank the hon. Member from my neighbouring county for giving way. I think his constituents would be quite shocked at him accusing the Conservatives of being ideological. Where is the aspiration for someone in Austell and this Cornwall constituency to grow those family businesses and to expand their family farms? Ultimately, his constituency is incredibly similar to mine, and I am in no doubt that some of the properties there are incredibly expensive but the salaries are not high. I challenge him; his constituents will have heard him say that they are fine with that, and that he is just tackling us from a point of ideology.

[Noah Law]

I respect the point the hon. Member makes and fully respect what she says about the aspirations of those of us who grew up in rural areas where property prices are often inflated. But I will be honest: I know very few people from back home who have ever paid inheritance tax. I do not know these people. If she would like to correct me on that—

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[Rebecca Smith (South West Devon) (Con)]

I will follow on from my hon. Friend the Member for Farnham and Bordon (Gregory Stafford), who set out a huge amount of what I will talk about, not least about the constant referral to the wealthy that we have heard in this debate. Frankly, it is offensive to any person out there who is working and, in many cases, not earning very much money, but saving a lot of it and working tirelessly to be able to buy a property, to invest in a business and to do the right thing.

Frankly, the one thing that I will take away from this debate is the massive generalisation that anyone we represent is somehow wealthy, and anyone Labour Members represent is somehow not. It is a complete fallacy, and it shows a complete disdain for working people. Indeed, we heard the hon. Member for Hornsey and Friern Barnet (Catherine West) imply that anyone who was not relying solely on the state pension was earning a lot, which is preposterous.

Buying a home is the biggest financial commitment that many families will ever make. It involves decades of saving, mortgage repayments and sacrifices along the way. The Conservative pledge to abolish inheritance tax on the family home would ensure that families were not penalised for passing on the home that they had worked so hard to own, often at the expense of doing other things. We know full well that people on benefits are able to get all sorts of discounts. It is the hard-working families across the country who do not go to theme parks at discounted rates, because they are paying a mortgage or, indeed, saving for one in the first place.

We will also raise the general inheritance tax allowance to £500,000 per person, or £1 million for a married couple. Crucially, this increased allowance will also benefit those who are unmarried or do not have children. Currently, a single person has an inheritance tax limit of only £325,000, which I think is completely wrong. There are many single people out there who work hard, and who sometimes have money that they have themselves inherited and on which they have also paid tax at multiple points. I hear from single constituents on my patch who are just so frustrated at being expected, time and again, to pay tax in order to pay for everyone else. Our proposal would give them greater freedom to leave more of what they have earned to the people who matter most to them, whether that person is a sibling, a niece or nephew, or another loved one.

As I have said, this is not about the very wealthy who already use trusts and other mechanisms to protect their assets. This is about helping normal families who have seen the price of their family home shoot up over the years, tipping them over the threshold for inheritance tax through no fault of their own. Indeed, in my own Conservative constituency—the so-called wealthy area South West Devon—the Plymouth median salary is £36,500 pounds. Plymouth is generally seen as being quite poor, but in the West Devon and South Hams part of my constituency the median salary is between £26,500 and £30,000. These are hardly wealthy people. As my hon. Friend the Member for Harborough, Oadby and Wigston (Neil O’Brien) has rightly said, inheritance tax has

“become a tax for normal people who live on new build estates, not fancy people who have estates.”

Just 2.7% of homes were faced with an inheritance tax bill in 2009-10, but that could rise to 8.2% in 2029-30, according to research by Oxford Economics.

This issue is particularly relevant in the South Hams part of my constituency, where the average home costs £355,000, the third highest figure in the south-west. In Wembury, Brixton and Newton Ferrers, the median property sold for more than £360,000 in the last year, rising to more than £520,000 for detached homes. In Ivybridge, a property was recently sold for almost £420,000. Many of these properties were bought decades ago for considerably less, yet the basic inheritance tax threshold has remained frozen. Others have already mentioned the pension increase whereby pension funds will be included in inheritance tax calculations.

Scrapping inheritance tax on family homes is about strengthening the social contract, which is, in the great words of Edmund Burke, the indivisible bond between those who came before us, those who are here today, and those who will follow. Conservatives want to protect that partnership. We are backing parents who save responsibly and want their children and grandchildren to benefit from the sacrifices that they have made.

[Noah Law]

The hon. Lady has referred to the indivisible bond between families. Does she not agree that that bond must also apply to the community and the public more generally, from generation to generation?

[Rebecca Smith]

I think that is called general taxation, and these people have paid that throughout their working lives. Why are we now targeting them at the point at which they die, or indeed inherit money? I just do not think that is a workable opinion, and I deeply disagree.

The Conservatives want to protect the social contract. We are backing parents who have saved responsibly, and who want their children and grandchildren to benefit from the sacrifices they have made. As we have heard, that stands in stark contrast to Labour, which is widening the inheritance tax net ever further by sucking in family farms, pensions and family businesses. As Conservatives, we believe that hard work should be rewarded. Families who have done the right thing should be able to pass something on to the next generation.